Correlation Between First Capital and Pacific Premier

Can any of the company-specific risk be diversified away by investing in both First Capital and Pacific Premier 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 First Capital and Pacific Premier into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Capital and Pacific Premier Bancorp, you can compare the effects of market volatilities on First Capital and Pacific Premier 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 First Capital with a short position of Pacific Premier. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and Pacific Premier.

Diversification Opportunities for First Capital and Pacific Premier

-0.25

Correlation Coefficient

First Capital  Pacific Premier

Very good diversification

The 3 months correlation between First and Pacific is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Pacific Premier Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Premier Bancorp and First Capital 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 First Capital are associated (or correlated) with Pacific Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Premier Bancorp has no effect on the direction of First Capital i.e., First Capital and Pacific Premier go up and down completely randomly.

Pair Corralation between First Capital and Pacific Premier

Given the investment horizon of 90 days First Capital is expected to under-perform the Pacific Premier. But the stock apears to be less risky and, when comparing its historical volatility, First Capital is 1.32 times less risky than Pacific Premier. The stock trades about -0.06 of its potential returns per unit of risk. The Pacific Premier Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,406  in Pacific Premier Bancorp on October 6, 2024 and sell it today you would earn a total of  87.00  from holding Pacific Premier Bancorp or generate 3.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

First Capital  vs.  Pacific Premier Bancorp

First Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pacific Premier Bancorp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Premier Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Pacific Premier is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with First Capital and Pacific Premier

The main advantage of trading using opposite First Capital and Pacific Premier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital position performs unexpectedly, Pacific Premier 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 Premier will offset losses from the drop in Pacific Premier's long position.

The idea behind First Capital and Pacific Premier 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.