Correlation Between Pacific Premier and ECB Bancorp

Can any of the company-specific risk be diversified away by investing in both Pacific Premier and ECB 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 ECB 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 ECB Bancorp, you can compare the effects of market volatilities on Pacific Premier and ECB 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 ECB Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Premier and ECB Bancorp.

Diversification Opportunities for Pacific Premier and ECB Bancorp

0.59

Correlation Coefficient

Pacific Premier  ECB Bancorp

Very weak diversification

The 3 months correlation between Pacific and ECB is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Premier Bancorp and ECB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECB 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 ECB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECB Bancorp has no effect on the direction of Pacific Premier i.e., Pacific Premier and ECB Bancorp go up and down completely randomly.

Pair Corralation between Pacific Premier and ECB Bancorp

Given the investment horizon of 90 days Pacific Premier Bancorp is expected to generate 1.63 times more return on investment than ECB Bancorp. However, Pacific Premier is 1.63 times more volatile than ECB Bancorp. It trades about 0.0 of its potential returns per unit of risk. ECB Bancorp is currently generating about 0.0 per unit of risk. If you would invest  2,807  in Pacific Premier Bancorp on October 5, 2024 and sell it today you would lose (356.00) from holding Pacific Premier Bancorp or give up 12.68% of portfolio value over 90 days.

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

Pacific Premier Bancorp  vs.  ECB 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.

ECB Bancorp

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ECB Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, ECB Bancorp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Pacific Premier and ECB Bancorp

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

The idea behind Pacific Premier Bancorp and ECB 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.