Correlation Between PacWest Bancorp and Western Alliance

Can any of the company-specific risk be diversified away by investing in both PacWest Bancorp and Western Alliance 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 PacWest Bancorp and Western Alliance into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for PacWest Bancorp and Western Alliance

0.0

Correlation Coefficient

PacWest Bancorp  Western Alliance

Pay attention - limited upside

The 3 months correlation between PacWest and Western is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding PacWest Bancorp and Western Alliance Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alliance Ban and PacWest Bancorp 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 PacWest Bancorp are associated (or correlated) with Western Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alliance Ban has no effect on the direction of PacWest Bancorp i.e., PacWest Bancorp and Western Alliance go up and down completely randomly.

Pair Corralation between PacWest Bancorp and Western Alliance

If you would invest (100.00) in PacWest Bancorp on December 29, 2024 and sell it today you would earn a total of  100.00  from holding PacWest Bancorp or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

PacWest Bancorp  vs.  Western Alliance Bancorp.

PacWest Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days PacWest Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, PacWest Bancorp is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Western Alliance Ban

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Alliance Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with PacWest Bancorp and Western Alliance

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

The idea behind PacWest Bancorp and Western Alliance Bancorporation 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 Transaction History module to view history of all your transactions and understand their impact on performance.