Correlation Between Western Alliance and Peapack Gladstone

Can any of the company-specific risk be diversified away by investing in both Western Alliance and Peapack Gladstone 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 Western Alliance and Peapack Gladstone into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Alliance Bancorporation and Peapack Gladstone Financial, you can compare the effects of market volatilities on Western Alliance and Peapack Gladstone 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 Western Alliance with a short position of Peapack Gladstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Alliance and Peapack Gladstone.

Diversification Opportunities for Western Alliance and Peapack Gladstone

0.85

Correlation Coefficient

Western Alliance  Peapack Gladstone

Very poor diversification

The 3 months correlation between Western and Peapack is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Western Alliance Bancorp. and Peapack Gladstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peapack Gladstone and Western Alliance 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 Western Alliance Bancorporation are associated (or correlated) with Peapack Gladstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peapack Gladstone has no effect on the direction of Western Alliance i.e., Western Alliance and Peapack Gladstone go up and down completely randomly.

Pair Corralation between Western Alliance and Peapack Gladstone

Considering the 90-day investment horizon Western Alliance Bancorporation is expected to generate 1.28 times more return on investment than Peapack Gladstone. However, Western Alliance is 1.28 times more volatile than Peapack Gladstone Financial. It trades about -0.05 of its potential returns per unit of risk. Peapack Gladstone Financial is currently generating about -0.09 per unit of risk. If you would invest  8,321  in Western Alliance Bancorporation on December 29, 2024 and sell it today you would lose (709.00) from holding Western Alliance Bancorporation or give up 8.52% of portfolio value over 90 days.

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

Western Alliance Bancorp.  vs.  Peapack Gladstone Financial

Western Alliance Ban

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Alliance Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Peapack Gladstone

Risk-Adjusted Performance

Very Weak

Over the last 90 days Peapack Gladstone Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Western Alliance and Peapack Gladstone

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

The idea behind Western Alliance Bancorporation and Peapack Gladstone 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.