Correlation Between Financial Institutions and Comerica
Can any of the company-specific risk be diversified away by investing in both Financial Institutions and Comerica 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 Financial Institutions and Comerica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Institutions and Comerica, you can compare the effects of market volatilities on Financial Institutions and Comerica 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 Financial Institutions with a short position of Comerica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Institutions and Comerica.
Diversification Opportunities for Financial Institutions and Comerica
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Financial and Comerica is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Financial Institutions and Comerica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comerica and Financial Institutions 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 Financial Institutions are associated (or correlated) with Comerica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comerica has no effect on the direction of Financial Institutions i.e., Financial Institutions and Comerica go up and down completely randomly.
Pair Corralation between Financial Institutions and Comerica
Given the investment horizon of 90 days Financial Institutions is expected to generate 1.4 times less return on investment than Comerica. In addition to that, Financial Institutions is 1.24 times more volatile than Comerica. It trades about 0.14 of its total potential returns per unit of risk. Comerica is currently generating about 0.25 per unit of volatility. If you would invest 6,267 in Comerica on August 29, 2024 and sell it today you would earn a total of 997.00 from holding Comerica or generate 15.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Institutions vs. Comerica
Performance |
| Timeline |
| Financial Institutions |
| Comerica |
Financial Institutions and Comerica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Institutions and Comerica
The main advantage of trading using opposite Financial Institutions and Comerica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Institutions position performs unexpectedly, Comerica 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 Comerica will offset losses from the drop in Comerica's long position.| Financial Institutions vs. First Community | Financial Institutions vs. Community West Bancshares | Financial Institutions vs. First Financial Northwest | Financial Institutions vs. First Northwest Bancorp |
| Comerica vs. Western Alliance Bancorporation | Comerica vs. KeyCorp | Comerica vs. Truist Financial Corp | Comerica vs. Zions Bancorporation |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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