Correlation Between Comerica and First Financial
Can any of the company-specific risk be diversified away by investing in both Comerica and First Financial 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 Comerica and First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Comerica and First Financial Bancorp, you can compare the effects of market volatilities on Comerica and First Financial 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 Comerica with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Comerica and First Financial.
Diversification Opportunities for Comerica and First Financial
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Comerica and First is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Comerica and First Financial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bancorp and Comerica 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 Comerica are associated (or correlated) with First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Bancorp has no effect on the direction of Comerica i.e., Comerica and First Financial go up and down completely randomly.
Pair Corralation between Comerica and First Financial
Considering the 90-day investment horizon Comerica is expected to generate 1.17 times less return on investment than First Financial. But when comparing it to its historical volatility, Comerica is 1.22 times less risky than First Financial. It trades about 0.2 of its potential returns per unit of risk. First Financial Bancorp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,604 in First Financial Bancorp on August 31, 2024 and sell it today you would earn a total of 367.00 from holding First Financial Bancorp or generate 14.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Comerica vs. First Financial Bancorp
Performance |
| Timeline |
| Comerica |
| First Financial Bancorp |
Comerica and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Comerica and First Financial
The main advantage of trading using opposite Comerica and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Comerica position performs unexpectedly, First Financial 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 First Financial will offset losses from the drop in First Financial's long position.| Comerica vs. Western Alliance Bancorporation | Comerica vs. KeyCorp | Comerica vs. Truist Financial Corp | Comerica vs. Zions Bancorporation |
| First Financial vs. Home Bancorp | First Financial vs. Heritage Financial | First Financial vs. First Northwest Bancorp | First Financial vs. HomeTrust Bancshares |
Check out your portfolio center.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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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