Correlation Between Pacific Premier and Eagle Bancorp

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

Diversification Opportunities for Pacific Premier and Eagle Bancorp

0.45

Correlation Coefficient

Pacific Premier  Eagle Bancorp

Very weak diversification

The 3 months correlation between Pacific and Eagle is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Premier Bancorp and Eagle Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Bancorp 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 Eagle Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Bancorp has no effect on the direction of Pacific Premier i.e., Pacific Premier and Eagle Bancorp go up and down completely randomly.

Pair Corralation between Pacific Premier and Eagle Bancorp

Given the investment horizon of 90 days Pacific Premier is expected to generate 1.42 times less return on investment than Eagle Bancorp. But when comparing it to its historical volatility, Pacific Premier Bancorp is 1.22 times less risky than Eagle Bancorp. It trades about 0.23 of its potential returns per unit of risk. Eagle Bancorp is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  2,277  in Eagle Bancorp on August 8, 2024 and sell it today you would earn a total of  692.00  from holding Eagle Bancorp or generate 30.39% return on investment over 90 days.

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

Pacific Premier Bancorp  vs.  Eagle Bancorp

Pacific Premier Bancorp

Risk-Adjusted Performance

2 of 100

Weak

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

Eagle Bancorp

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Bancorp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental drivers, Eagle Bancorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pacific Premier and Eagle Bancorp

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

The idea behind Pacific Premier Bancorp and Eagle 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.