Pacific Premier Bancorp (PPBI:Nasdaq) vs. Western Alliance Bancorporation (WAL:NYSE)
Watch our trade analysis below:
Here at PairTrade Finder® we look to trade pairs with high cointegration, correlation and win rate.
This great stock pair, PPBI/WAL, is part of our Top 30 US Equities Pairs. In backtesting, it produced 10 trades with a 90% Win Rate over the past 2 years. That result equates to a Total Gross Profit of $4,788, an average win of $435/trade and a 17.4% CAGR (unlevered). What’s more, these results were delivered with only a 9.1% Max Drawdown*. It has an 82% correlation and is highly cointegrated using the Cointegration Augmented Dicky Fuller test (0.98, p-value of 0.02).
Importantly, the last trade of this pair (which was available for subscribers to trade live) closed on 7 May 2019 and generated $488 in 10 trading days on $10k/leg. That equates to a 12.2% Return on Margin based on using the 5:1 leverage available to novice CFD traders at Interactive Brokers.
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And for more information regarding empirical research on the historic profitability of a stock pair trading strategy, please see our Pair Trading Resources section. In it you will find recent academic research that rigorously demonstrates the robustness of this popular hedge fund trading strategy.
Happy Trading!
The PairTrade Finder® Team
*Backtested results of signals from this stock pair using $10k/leg for each trade and a 25 bp commissions/slippage estimate per trade. Tested using Yahoo Finance Adjusted Close daily data and combining in-sample and out-of-sample results for the last two years.
NB: The Top 30 example US equities pairs in PairTrade Finder® PRO are provided for informational and educational purposes only. They should not be construed as personalized investment advice. It should not be assumed that trading using the parameters demonstrated by the Software will be profitable and will not result in losses.
