Correlation Between Provident Financial and Pacific Premier

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

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

Diversification Opportunities for Provident Financial and Pacific Premier

0.94

Correlation Coefficient

Provident Financial  Pacific Premier

Almost no diversification

The 3 months correlation between Provident and Pacific is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Provident Financial Services 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 Provident Financial 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 Provident Financial Services 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 Provident Financial i.e., Provident Financial and Pacific Premier go up and down completely randomly.

Pair Corralation between Provident Financial and Pacific Premier

Considering the 90-day investment horizon Provident Financial Services is expected to generate 0.86 times more return on investment than Pacific Premier. However, Provident Financial Services is 1.16 times less risky than Pacific Premier. It trades about 0.0 of its potential returns per unit of risk. Pacific Premier Bancorp is currently generating about 0.0 per unit of risk. If you would invest  2,098  in Provident Financial Services on October 22, 2024 and sell it today you would lose (166.00) from holding Provident Financial Services or give up 7.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Provident Financial Services  vs.  Pacific Premier Bancorp

Provident Financial

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Provident Financial Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Provident Financial is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pacific Premier Bancorp

Risk-Adjusted Performance

0 of 100

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 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 Provident Financial and Pacific Premier

The main advantage of trading using opposite Provident Financial and Pacific Premier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Provident Financial 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 Provident Financial Services 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.