Correlation Between Pacific West and Oregon Bancorp

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

Diversification Opportunities for Pacific West and Oregon Bancorp

0.03

Correlation Coefficient

Pacific West  Oregon Bancorp

Significant diversification

The 3 months correlation between Pacific and Oregon is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Pacific West Bancorp and Oregon Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oregon Bancorp 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 Oregon Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oregon Bancorp has no effect on the direction of Pacific West i.e., Pacific West and Oregon Bancorp go up and down completely randomly.

Pair Corralation between Pacific West and Oregon Bancorp

Given the investment horizon of 90 days Pacific West Bancorp is expected to under-perform the Oregon Bancorp. In addition to that, Pacific West is 2.77 times more volatile than Oregon Bancorp. It trades about -0.07 of its total potential returns per unit of risk. Oregon Bancorp is currently generating about -0.19 per unit of volatility. If you would invest  2,359  in Oregon Bancorp on October 11, 2024 and sell it today you would lose (129.00) from holding Oregon Bancorp or give up 5.47% of portfolio value over 90 days.

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

Pacific West Bancorp  vs.  Oregon Bancorp

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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Oregon Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oregon Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Oregon Bancorp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pacific West and Oregon Bancorp

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

The idea behind Pacific West Bancorp and Oregon 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..