Correlation Between Old Point and Pacific Premier

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

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

Diversification Opportunities for Old Point and Pacific Premier

-0.7

Correlation Coefficient

Old Point  Pacific Premier

Excellent diversification

The 3 months correlation between Old and Pacific is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Old Point Financial 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 Old Point 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 Old Point Financial 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 Old Point i.e., Old Point and Pacific Premier go up and down completely randomly.

Pair Corralation between Old Point and Pacific Premier

Given the investment horizon of 90 days Old Point Financial is expected to generate 0.94 times more return on investment than Pacific Premier. However, Old Point Financial is 1.06 times less risky than Pacific Premier. It trades about 0.17 of its potential returns per unit of risk. Pacific Premier Bancorp is currently generating about -0.1 per unit of risk. If you would invest  2,557  in Old Point Financial on December 28, 2024 and sell it today you would earn a total of  445.00  from holding Old Point Financial or generate 17.4% return on investment over 90 days.

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

Old Point Financial  vs.  Pacific Premier Bancorp

Old Point Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Old Point Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Old Point reported solid returns over the last few months and may actually be approaching a breakup point.

Pacific Premier Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacific Premier Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Old Point and Pacific Premier

The main advantage of trading using opposite Old Point and Pacific Premier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Point 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 Old Point Financial 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.