Correlation Between Comerica and Mountain Commerce

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

By analyzing existing cross correlation between Comerica and Mountain Commerce Bancorp, you can compare the effects of market volatilities on Comerica and Mountain Commerce 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 Mountain Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Comerica and Mountain Commerce.

Diversification Opportunities for Comerica and Mountain Commerce

-0.04

Correlation Coefficient

Comerica  Mountain Commerce

Good diversification

The 3 months correlation between Comerica and Mountain is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Comerica and Mountain Commerce Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Commerce 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 Mountain Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Commerce Bancorp has no effect on the direction of Comerica i.e., Comerica and Mountain Commerce go up and down completely randomly.

Pair Corralation between Comerica and Mountain Commerce

Considering the 90-day investment horizon Comerica is expected to generate 1.74 times more return on investment than Mountain Commerce. However, Comerica is 1.74 times more volatile than Mountain Commerce Bancorp. It trades about -0.09 of its potential returns per unit of risk. Mountain Commerce Bancorp is currently generating about -0.19 per unit of risk. If you would invest  7,148  in Comerica on November 29, 2024 and sell it today you would lose (743.00) from holding Comerica or give up 10.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	48.33%
Values	Daily Returns

Comerica  vs.  Mountain Commerce Bancorp

Comerica

Risk-Adjusted Performance

Very Weak

Over the last 90 days Comerica has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Mountain Commerce Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mountain Commerce Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Comerica and Mountain Commerce

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

The idea behind Comerica and Mountain Commerce 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.