Correlation Between Wintrust Financial and Western Alliance

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Can any of the company-specific risk be diversified away by investing in both Wintrust Financial 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 Wintrust Financial and Western Alliance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wintrust Financial Corp and Western Alliance Bancorporation, you can compare the effects of market volatilities on Wintrust Financial 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 Wintrust Financial with a short position of Western Alliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wintrust Financial and Western Alliance.

Diversification Opportunities for Wintrust Financial and Western Alliance

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Wintrust and Western is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Wintrust Financial Corp 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 Wintrust Financial 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 Wintrust Financial Corp 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 Wintrust Financial i.e., Wintrust Financial and Western Alliance go up and down completely randomly.

Pair Corralation between Wintrust Financial and Western Alliance

Assuming the 90 days horizon Wintrust Financial is expected to generate 12.07 times less return on investment than Western Alliance. But when comparing it to its historical volatility, Wintrust Financial Corp is 9.2 times less risky than Western Alliance. It trades about 0.21 of its potential returns per unit of risk. Western Alliance Bancorporation is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  2,039  in Western Alliance Bancorporation on September 1, 2024 and sell it today you would earn a total of  156.00  from holding Western Alliance Bancorporation or generate 7.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

Wintrust Financial Corp  vs.  Western Alliance Bancorp.

 Performance 
       Timeline  
Wintrust Financial Corp 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Wintrust Financial Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Wintrust Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.
Western Alliance Ban 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Western Alliance Bancorporation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating essential indicators, Western Alliance may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Wintrust Financial and Western Alliance Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Wintrust Financial and Western Alliance

The main advantage of trading using opposite Wintrust Financial and Western Alliance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wintrust Financial 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.
The idea behind Wintrust Financial Corp and Western Alliance Bancorporation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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