Correlation Between Prosperity Bancshares and Western Alliance
Can any of the company-specific risk be diversified away by investing in both Prosperity Bancshares and Western Alliance 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 Prosperity Bancshares and Western Alliance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosperity Bancshares and Western Alliance Bancorporation, you can compare the effects of market volatilities on Prosperity Bancshares and Western Alliance 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 Prosperity Bancshares with a short position of Western Alliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosperity Bancshares and Western Alliance.
Diversification Opportunities for Prosperity Bancshares and Western Alliance
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prosperity and Western is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and Western Alliance Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alliance Ban and Prosperity Bancshares 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 Prosperity Bancshares are associated (or correlated) with Western Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alliance Ban has no effect on the direction of Prosperity Bancshares i.e., Prosperity Bancshares and Western Alliance go up and down completely randomly.
Pair Corralation between Prosperity Bancshares and Western Alliance
Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to generate 0.66 times more return on investment than Western Alliance. However, Prosperity Bancshares is 1.52 times less risky than Western Alliance. It trades about 0.28 of its potential returns per unit of risk. Western Alliance Bancorporation is currently generating about 0.16 per unit of risk. If you would invest 7,325 in Prosperity Bancshares on August 30, 2024 and sell it today you would earn a total of 1,092 from holding Prosperity Bancshares or generate 14.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prosperity Bancshares vs. Western Alliance Bancorp.
Performance |
| Timeline |
| Prosperity Bancshares |
| Western Alliance Ban |
Prosperity Bancshares and Western Alliance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosperity Bancshares and Western Alliance
The main advantage of trading using opposite Prosperity Bancshares and Western Alliance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosperity Bancshares position performs unexpectedly, Western Alliance 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 Western Alliance will offset losses from the drop in Western Alliance's long position.| Prosperity Bancshares vs. Heartland Financial USA | Prosperity Bancshares vs. Heritage Commerce Corp | Prosperity Bancshares vs. Business First Bancshares | Prosperity Bancshares vs. German American Bancorp |
| Western Alliance vs. Zions Bancorporation | Western Alliance vs. KeyCorp | Western Alliance vs. First Horizon National | Western Alliance vs. Comerica |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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