Correlation Between Comerica and 1st Colonial

Can any of the company-specific risk be diversified away by investing in both Comerica and 1st Colonial 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 Comerica and 1st Colonial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Comerica and 1st Colonial Bancorp, you can compare the effects of market volatilities on Comerica and 1st Colonial 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 Comerica with a short position of 1st Colonial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Comerica and 1st Colonial.

Diversification Opportunities for Comerica and 1st Colonial

-0.83

Correlation Coefficient

Comerica  1st Colonial

Pay attention - limited upside

The 3 months correlation between Comerica and 1st is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Comerica and 1st Colonial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1st Colonial Bancorp and Comerica 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 Comerica are associated (or correlated) with 1st Colonial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1st Colonial Bancorp has no effect on the direction of Comerica i.e., Comerica and 1st Colonial go up and down completely randomly.

Pair Corralation between Comerica and 1st Colonial

Considering the 90-day investment horizon Comerica is expected to generate 2.19 times more return on investment than 1st Colonial. However, Comerica is 2.19 times more volatile than 1st Colonial Bancorp. It trades about 0.18 of its potential returns per unit of risk. 1st Colonial Bancorp is currently generating about -0.03 per unit of risk. If you would invest  5,475  in Comerica on September 7, 2024 and sell it today you would earn a total of  1,463  from holding Comerica or generate 26.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Comerica  vs.  1st Colonial Bancorp

Comerica

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Comerica are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady primary indicators, Comerica sustained solid returns over the last few months and may actually be approaching a breakup point.

1st Colonial Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1st Colonial Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 1st Colonial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Comerica and 1st Colonial

The main advantage of trading using opposite Comerica and 1st Colonial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Comerica position performs unexpectedly, 1st Colonial 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 1st Colonial will offset losses from the drop in 1st Colonial's long position.

The idea behind Comerica and 1st Colonial Bancorp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.