Correlation Between Western Alliance and ChoiceOne Financial
Can any of the company-specific risk be diversified away by investing in both Western Alliance and ChoiceOne 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 Western Alliance and ChoiceOne Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Alliance Bancorporation and ChoiceOne Financial Services, you can compare the effects of market volatilities on Western Alliance and ChoiceOne 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 Western Alliance with a short position of ChoiceOne Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Alliance and ChoiceOne Financial.
Diversification Opportunities for Western Alliance and ChoiceOne Financial
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and ChoiceOne is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Western Alliance Bancorp. and ChoiceOne Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChoiceOne Financial and Western Alliance 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 Western Alliance Bancorporation are associated (or correlated) with ChoiceOne Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChoiceOne Financial has no effect on the direction of Western Alliance i.e., Western Alliance and ChoiceOne Financial go up and down completely randomly.
Pair Corralation between Western Alliance and ChoiceOne Financial
Considering the 90-day investment horizon Western Alliance Bancorporation is expected to generate 0.86 times more return on investment than ChoiceOne Financial. However, Western Alliance Bancorporation is 1.16 times less risky than ChoiceOne Financial. It trades about 0.1 of its potential returns per unit of risk. ChoiceOne Financial Services is currently generating about 0.06 per unit of risk. If you would invest 5,370 in Western Alliance Bancorporation on September 2, 2024 and sell it today you would earn a total of 3,991 from holding Western Alliance Bancorporation or generate 74.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Alliance Bancorp. vs. ChoiceOne Financial Services
Performance |
| Timeline |
| Western Alliance Ban |
| ChoiceOne Financial |
Western Alliance and ChoiceOne Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Alliance and ChoiceOne Financial
The main advantage of trading using opposite Western Alliance and ChoiceOne Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Alliance position performs unexpectedly, ChoiceOne 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 ChoiceOne Financial will offset losses from the drop in ChoiceOne Financial's long position.| Western Alliance vs. Zions Bancorporation | Western Alliance vs. KeyCorp | Western Alliance vs. First Horizon National | Western Alliance vs. Comerica |
| ChoiceOne Financial vs. Affinity Bancshares | ChoiceOne Financial vs. Auburn National Bancorporation | ChoiceOne Financial vs. First Community | ChoiceOne Financial vs. LINKBANCORP |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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