Correlation Between Western Alliance and First Community
Can any of the company-specific risk be diversified away by investing in both Western Alliance and First Community 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 First Community 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 First Community, you can compare the effects of market volatilities on Western Alliance and First Community 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 First Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Alliance and First Community.
Diversification Opportunities for Western Alliance and First Community
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and First is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Western Alliance Bancorp. and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community 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 First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community has no effect on the direction of Western Alliance i.e., Western Alliance and First Community go up and down completely randomly.
Pair Corralation between Western Alliance and First Community
Considering the 90-day investment horizon Western Alliance Bancorporation is expected to generate 2.54 times more return on investment than First Community. However, Western Alliance is 2.54 times more volatile than First Community. It trades about 0.16 of its potential returns per unit of risk. First Community is currently generating about 0.32 per unit of risk. If you would invest 8,392 in Western Alliance Bancorporation on August 31, 2024 and sell it today you would earn a total of 958.00 from holding Western Alliance Bancorporation or generate 11.42% 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. First Community
Performance |
| Timeline |
| Western Alliance Ban |
| First Community |
Western Alliance and First Community Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Alliance and First Community
The main advantage of trading using opposite Western Alliance and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Alliance position performs unexpectedly, First Community 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 Community will offset losses from the drop in First Community's long position.| Western Alliance vs. Zions Bancorporation | Western Alliance vs. KeyCorp | Western Alliance vs. First Horizon National | Western Alliance vs. Comerica |
| First Community vs. KeyCorp | First Community vs. Comerica | First Community vs. First Horizon National | First Community vs. Western Alliance 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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