Correlation Between Western Alliance and Orange County
Can any of the company-specific risk be diversified away by investing in both Western Alliance and Orange County 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 Orange County 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 Orange County Bancorp, you can compare the effects of market volatilities on Western Alliance and Orange County 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 Orange County. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Alliance and Orange County.
Diversification Opportunities for Western Alliance and Orange County
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Orange is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Western Alliance Bancorp. and Orange County Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange County Bancorp 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 Orange County. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange County Bancorp has no effect on the direction of Western Alliance i.e., Western Alliance and Orange County go up and down completely randomly.
Pair Corralation between Western Alliance and Orange County
Considering the 90-day investment horizon Western Alliance Bancorporation is expected to generate 1.19 times more return on investment than Orange County. However, Western Alliance is 1.19 times more volatile than Orange County Bancorp. It trades about 0.18 of its potential returns per unit of risk. Orange County Bancorp is currently generating about 0.19 per unit of risk. If you would invest 8,297 in Western Alliance Bancorporation on September 2, 2024 and sell it today you would earn a total of 1,064 from holding Western Alliance Bancorporation or generate 12.82% 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. Orange County Bancorp
Performance |
| Timeline |
| Western Alliance Ban |
| Orange County Bancorp |
Western Alliance and Orange County Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Alliance and Orange County
The main advantage of trading using opposite Western Alliance and Orange County positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Alliance position performs unexpectedly, Orange County 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 Orange County will offset losses from the drop in Orange County's long position.| Western Alliance vs. Zions Bancorporation | Western Alliance vs. KeyCorp | Western Alliance vs. First Horizon National | Western Alliance vs. Comerica |
| Orange County vs. Southern States Bancshares | Orange County vs. US Century Bank | Orange County vs. Third Coast Bancshares | Orange County vs. Esquire Financial Holdings |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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