Correlation Between Wintrust Financial and PacWest Bancorp

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

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

Diversification Opportunities for Wintrust Financial and PacWest Bancorp

-0.16

Correlation Coefficient

Wintrust Financial  PacWest Bancorp

Good diversification

The 3 months correlation between Wintrust and PacWest is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Wintrust Financial Corp and PacWest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacWest Bancorp and Wintrust 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 Wintrust Financial Corp are associated (or correlated) with PacWest Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PacWest Bancorp has no effect on the direction of Wintrust Financial i.e., Wintrust Financial and PacWest Bancorp go up and down completely randomly.

Pair Corralation between Wintrust Financial and PacWest Bancorp

Assuming the 90 days horizon Wintrust Financial is expected to generate 10.74 times less return on investment than PacWest Bancorp. But when comparing it to its historical volatility, Wintrust Financial Corp is 10.43 times less risky than PacWest Bancorp. It trades about 0.03 of its potential returns per unit of risk. PacWest Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,337  in PacWest Bancorp on September 13, 2024 and sell it today you would lose (867.00) from holding PacWest Bancorp or give up 37.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	25.91%
Values	Daily Returns

Wintrust Financial Corp  vs.  PacWest Bancorp

Wintrust Financial Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wintrust Financial Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Wintrust Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

PacWest Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PacWest Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PacWest Bancorp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Wintrust Financial and PacWest Bancorp

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

The idea behind Wintrust Financial Corp and PacWest 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.