Correlation Between Pacific Premier and First Interstate

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

Diversification Opportunities for Pacific Premier and First Interstate

0.75

Correlation Coefficient

Pacific Premier  First Interstate

Poor diversification

The 3 months correlation between Pacific and First is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Premier Bancorp and First Interstate BancSystem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Interstate Ban 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 First Interstate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Interstate Ban has no effect on the direction of Pacific Premier i.e., Pacific Premier and First Interstate go up and down completely randomly.

Pair Corralation between Pacific Premier and First Interstate

Given the investment horizon of 90 days Pacific Premier Bancorp is expected to under-perform the First Interstate. In addition to that, Pacific Premier is 1.15 times more volatile than First Interstate BancSystem. It trades about -0.3 of its total potential returns per unit of risk. First Interstate BancSystem is currently generating about -0.17 per unit of volatility. If you would invest  3,450  in First Interstate BancSystem on October 5, 2024 and sell it today you would lose (203.00) from holding First Interstate BancSystem or give up 5.88% of portfolio value over 90 days.

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

Pacific Premier Bancorp  vs.  First Interstate BancSystem

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.

First Interstate Ban

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Interstate BancSystem are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental drivers, First Interstate disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pacific Premier and First Interstate

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

The idea behind Pacific Premier Bancorp and First Interstate BancSystem 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.