Correlation Between Dupont De and Pacific West

Can any of the company-specific risk be diversified away by investing in both Dupont De and Pacific West at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Dupont De and Pacific West into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dupont De Nemours and Pacific West Bancorp, you can compare the effects of market volatilities on Dupont De and Pacific West and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Dupont De with a short position of Pacific West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Pacific West.

Diversification Opportunities for Dupont De and Pacific West

-0.12

Correlation Coefficient

Dupont De  Pacific West

Good diversification

The 3 months correlation between Dupont and Pacific is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Pacific West Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific West Bancorp and Dupont De is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Dupont De Nemours are associated (or correlated) with Pacific West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific West Bancorp has no effect on the direction of Dupont De i.e., Dupont De and Pacific West go up and down completely randomly.

Pair Corralation between Dupont De and Pacific West

Allowing for the 90-day total investment horizon Dupont De is expected to generate 7.14 times less return on investment than Pacific West. But when comparing it to its historical volatility, Dupont De Nemours is 2.96 times less risky than Pacific West. It trades about 0.01 of its potential returns per unit of risk. Pacific West Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,100  in Pacific West Bancorp on October 26, 2024 and sell it today you would earn a total of  10.00  from holding Pacific West Bancorp or generate 0.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Dupont De Nemours  vs.  Pacific West Bancorp

Dupont De Nemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pacific West Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific West Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal fundamental drivers, Pacific West may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dupont De and Pacific West

The main advantage of trading using opposite Dupont De and Pacific West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De position performs unexpectedly, Pacific West can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Pacific West will offset losses from the drop in Pacific West's long position.

The idea behind Dupont De Nemours and Pacific West Bancorp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.