Correlation Between Caixabank and Western Alliance

Can any of the company-specific risk be diversified away by investing in both Caixabank 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 Caixabank and Western Alliance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caixabank SA ADR and Western Alliance Bancorporation, you can compare the effects of market volatilities on Caixabank 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 Caixabank with a short position of Western Alliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caixabank and Western Alliance.

Diversification Opportunities for Caixabank and Western Alliance

-0.54

Correlation Coefficient

Caixabank  Western Alliance

Excellent diversification

The 3 months correlation between Caixabank and Western is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Caixabank SA ADR 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 Caixabank 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 Caixabank SA ADR 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 Caixabank i.e., Caixabank and Western Alliance go up and down completely randomly.

Pair Corralation between Caixabank and Western Alliance

Assuming the 90 days horizon Caixabank SA ADR is expected to generate 0.95 times more return on investment than Western Alliance. However, Caixabank SA ADR is 1.05 times less risky than Western Alliance. It trades about 0.27 of its potential returns per unit of risk. Western Alliance Bancorporation is currently generating about -0.05 per unit of risk. If you would invest  179.00  in Caixabank SA ADR on December 30, 2024 and sell it today you would earn a total of  81.00  from holding Caixabank SA ADR or generate 45.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Caixabank SA ADR  vs.  Western Alliance Bancorp.

Caixabank SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caixabank SA ADR are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Caixabank showed solid returns over the last few months and may actually be approaching a breakup point.

Western Alliance Ban

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Alliance Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Caixabank and Western Alliance

The main advantage of trading using opposite Caixabank and Western Alliance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caixabank 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 Caixabank SA ADR 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.