Correlation Between Comerica and Western New
Can any of the company-specific risk be diversified away by investing in both Comerica and Western New 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 Western New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Comerica and Western New England, you can compare the effects of market volatilities on Comerica and Western New 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 Western New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Comerica and Western New.
Diversification Opportunities for Comerica and Western New
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Comerica and Western is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Comerica and Western New England in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western New England 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 Western New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western New England has no effect on the direction of Comerica i.e., Comerica and Western New go up and down completely randomly.
Pair Corralation between Comerica and Western New
Considering the 90-day investment horizon Comerica is expected to generate 1.59 times more return on investment than Western New. However, Comerica is 1.59 times more volatile than Western New England. It trades about 0.11 of its potential returns per unit of risk. Western New England is currently generating about 0.17 per unit of risk. If you would invest 5,799 in Comerica on September 16, 2024 and sell it today you would earn a total of 859.00 from holding Comerica or generate 14.81% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Comerica vs. Western New England
Performance |
Timeline |
Comerica |
Western New England |
Comerica and Western New Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Comerica and Western New
The main advantage of trading using opposite Comerica and Western New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Comerica position performs unexpectedly, Western New 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 Western New will offset losses from the drop in Western New's long position.The idea behind Comerica and Western New England 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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