Correlation Between Comerica and Plumas Bancorp

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

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

Diversification Opportunities for Comerica and Plumas Bancorp

0.73

Correlation Coefficient

Comerica  Plumas Bancorp

Poor diversification

The 3 months correlation between Comerica and Plumas is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Comerica and Plumas Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plumas 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 Plumas Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plumas Bancorp has no effect on the direction of Comerica i.e., Comerica and Plumas Bancorp go up and down completely randomly.

Pair Corralation between Comerica and Plumas Bancorp

Considering the 90-day investment horizon Comerica is expected to under-perform the Plumas Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Comerica is 1.27 times less risky than Plumas Bancorp. The stock trades about -0.21 of its potential returns per unit of risk. The Plumas Bancorp is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  4,855  in Plumas Bancorp on October 8, 2024 and sell it today you would lose (235.00) from holding Plumas Bancorp or give up 4.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Comerica  vs.  Plumas Bancorp

Comerica

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Comerica are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting primary indicators, Comerica may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Plumas Bancorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plumas Bancorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Plumas Bancorp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Comerica and Plumas Bancorp

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

The idea behind Comerica and Plumas 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.