Correlation Between Pacific West and Bank of Idaho

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

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

Diversification Opportunities for Pacific West and Bank of Idaho

0.57

Correlation Coefficient

Pacific West  Bank of Idaho

Very weak diversification

The 3 months correlation between Pacific and Bank is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pacific West Bancorp and Bank of Idaho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Idaho and Pacific West 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 West Bancorp are associated (or correlated) with Bank of Idaho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Idaho has no effect on the direction of Pacific West i.e., Pacific West and Bank of Idaho go up and down completely randomly.

Pair Corralation between Pacific West and Bank of Idaho

Given the investment horizon of 90 days Pacific West Bancorp is expected to under-perform the Bank of Idaho. In addition to that, Pacific West is 6.21 times more volatile than Bank of Idaho. It trades about -0.07 of its total potential returns per unit of risk. Bank of Idaho is currently generating about 0.45 per unit of volatility. If you would invest  3,335  in Bank of Idaho on October 11, 2024 and sell it today you would earn a total of  215.00  from holding Bank of Idaho or generate 6.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Pacific West Bancorp  vs.  Bank of Idaho

Pacific West Bancorp

Risk-Adjusted Performance

2 of 100

Weak

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

Bank of Idaho

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Idaho are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, Bank of Idaho may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pacific West and Bank of Idaho

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

The idea behind Pacific West Bancorp and Bank of Idaho 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.