Correlation Between Pacific Premier and Lakeland Financial

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

Diversification Opportunities for Pacific Premier and Lakeland Financial

0.91

Correlation Coefficient

Pacific Premier  Lakeland Financial

Almost no diversification

The 3 months correlation between Pacific and Lakeland is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Premier Bancorp and Lakeland Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakeland Financial 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 Lakeland Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakeland Financial has no effect on the direction of Pacific Premier i.e., Pacific Premier and Lakeland Financial go up and down completely randomly.

Pair Corralation between Pacific Premier and Lakeland Financial

Given the investment horizon of 90 days Pacific Premier Bancorp is expected to under-perform the Lakeland Financial. In addition to that, Pacific Premier is 1.28 times more volatile than Lakeland Financial. It trades about -0.12 of its total potential returns per unit of risk. Lakeland Financial is currently generating about -0.14 per unit of volatility. If you would invest  6,842  in Lakeland Financial on December 29, 2024 and sell it today you would lose (816.00) from holding Lakeland Financial or give up 11.93% of portfolio value over 90 days.

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

Pacific Premier Bancorp  vs.  Lakeland Financial

Pacific Premier Bancorp

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Lakeland Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lakeland Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Pacific Premier and Lakeland Financial

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

The idea behind Pacific Premier Bancorp and Lakeland Financial 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.