Correlation Between Comerica and Pinnacle Bank

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

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

Diversification Opportunities for Comerica and Pinnacle Bank

0.53

Correlation Coefficient

Comerica  Pinnacle Bank

Very weak diversification

The 3 months correlation between Comerica and Pinnacle is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Comerica and Pinnacle Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle Bank 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 Pinnacle Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle Bank has no effect on the direction of Comerica i.e., Comerica and Pinnacle Bank go up and down completely randomly.

Pair Corralation between Comerica and Pinnacle Bank

Considering the 90-day investment horizon Comerica is expected to generate 2.7 times more return on investment than Pinnacle Bank. However, Comerica is 2.7 times more volatile than Pinnacle Bank. It trades about 0.14 of its potential returns per unit of risk. Pinnacle Bank is currently generating about 0.07 per unit of risk. If you would invest  5,600  in Comerica on September 12, 2024 and sell it today you would earn a total of  1,116  from holding Comerica or generate 19.93% return on investment over 90 days.

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

Comerica  vs.  Pinnacle Bank

Comerica

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Comerica are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating primary indicators, Comerica sustained solid returns over the last few months and may actually be approaching a breakup point.

Pinnacle Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pinnacle Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Pinnacle Bank is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Comerica and Pinnacle Bank

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

The idea behind Comerica and Pinnacle Bank 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.