Correlation Between Pacific West and Montfort Capital

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

Diversification Opportunities for Pacific West and Montfort Capital

0.25

Correlation Coefficient

Pacific West  Montfort Capital

Modest diversification

The 3 months correlation between Pacific and Montfort is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Pacific West Bancorp and Montfort Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montfort Capital Corp 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 Montfort Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montfort Capital Corp has no effect on the direction of Pacific West i.e., Pacific West and Montfort Capital go up and down completely randomly.

Pair Corralation between Pacific West and Montfort Capital

Given the investment horizon of 90 days Pacific West is expected to generate 87.14 times less return on investment than Montfort Capital. But when comparing it to its historical volatility, Pacific West Bancorp is 96.62 times less risky than Montfort Capital. It trades about 0.15 of its potential returns per unit of risk. Montfort Capital Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1.94  in Montfort Capital Corp on May 6, 2025 and sell it today you would earn a total of  5.68  from holding Montfort Capital Corp or generate 292.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Pacific West Bancorp  vs.  Montfort Capital Corp

Pacific West Bancorp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific West Bancorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Pacific West disclosed solid returns over the last few months and may actually be approaching a breakup point.

Montfort Capital Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Montfort Capital Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Montfort Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pacific West and Montfort Capital

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

The idea behind Pacific West Bancorp and Montfort Capital Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.