Correlation Between Comerica and Westamerica Bancorporation

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

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

Diversification Opportunities for Comerica and Westamerica Bancorporation

0.96

Correlation Coefficient

Comerica  Westamerica Bancorporation

Almost no diversification

The 3 months correlation between Comerica and Westamerica is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Comerica and Westamerica Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westamerica Bancorporation 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 Westamerica Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westamerica Bancorporation has no effect on the direction of Comerica i.e., Comerica and Westamerica Bancorporation go up and down completely randomly.

Pair Corralation between Comerica and Westamerica Bancorporation

Considering the 90-day investment horizon Comerica is expected to under-perform the Westamerica Bancorporation. In addition to that, Comerica is 1.44 times more volatile than Westamerica Bancorporation. It trades about -0.17 of its total potential returns per unit of risk. Westamerica Bancorporation is currently generating about -0.1 per unit of volatility. If you would invest  5,781  in Westamerica Bancorporation on September 13, 2024 and sell it today you would lose (109.00) from holding Westamerica Bancorporation or give up 1.89% of portfolio value over 90 days.

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

Comerica  vs.  Westamerica Bancorp.

Comerica

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Comerica are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting primary indicators, Comerica sustained solid returns over the last few months and may actually be approaching a breakup point.

Westamerica Bancorporation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westamerica Bancorporation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, Westamerica Bancorporation exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Comerica and Westamerica Bancorporation

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

The idea behind Comerica and Westamerica 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.