Correlation Between Pacific Premier and Byline Bancorp

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

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

Diversification Opportunities for Pacific Premier and Byline Bancorp

0.85

Correlation Coefficient

Pacific Premier  Byline Bancorp

Very poor diversification

The 3 months correlation between Pacific and Byline is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Premier Bancorp and Byline Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byline Bancorp and Pacific Premier 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 Pacific Premier Bancorp are associated (or correlated) with Byline Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byline Bancorp has no effect on the direction of Pacific Premier i.e., Pacific Premier and Byline Bancorp go up and down completely randomly.

Pair Corralation between Pacific Premier and Byline Bancorp

Given the investment horizon of 90 days Pacific Premier Bancorp is expected to under-perform the Byline Bancorp. In addition to that, Pacific Premier is 1.28 times more volatile than Byline Bancorp. It trades about -0.3 of its total potential returns per unit of risk. Byline Bancorp is currently generating about -0.31 per unit of volatility. If you would invest  3,126  in Byline Bancorp on October 5, 2024 and sell it today you would lose (284.00) from holding Byline Bancorp or give up 9.09% of portfolio value over 90 days.

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

Pacific Premier Bancorp  vs.  Byline Bancorp

Pacific Premier Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Premier Bancorp are ranked lower than 1 (%) 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.

Byline Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Byline Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Byline Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pacific Premier and Byline Bancorp

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

The idea behind Pacific Premier Bancorp and Byline 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.