Correlation Between Savi Financial and Pacific West

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

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

Diversification Opportunities for Savi Financial and Pacific West

-0.23

Correlation Coefficient

Savi Financial  Pacific West

Very good diversification

The 3 months correlation between Savi and Pacific is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Savi Financial and Pacific West Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific West Bancorp and Savi Financial 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 Savi Financial are associated (or correlated) with Pacific West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific West Bancorp has no effect on the direction of Savi Financial i.e., Savi Financial and Pacific West go up and down completely randomly.

Pair Corralation between Savi Financial and Pacific West

Given the investment horizon of 90 days Savi Financial is expected to generate 0.08 times more return on investment than Pacific West. However, Savi Financial is 13.07 times less risky than Pacific West. It trades about 0.05 of its potential returns per unit of risk. Pacific West Bancorp is currently generating about -0.05 per unit of risk. If you would invest  1,515  in Savi Financial on December 19, 2024 and sell it today you would earn a total of  8.00  from holding Savi Financial or generate 0.53% return on investment over 90 days.

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

Savi Financial  vs.  Pacific West Bancorp

Savi Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Savi Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Savi Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pacific West Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacific West Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Savi Financial and Pacific West

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

The idea behind Savi Financial and Pacific West 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.