Correlation Between Orange County and Comerica

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

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

Diversification Opportunities for Orange County and Comerica

0.52

Correlation Coefficient

Orange County  Comerica

Very weak diversification

The 3 months correlation between Orange and Comerica is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Orange County Bancorp and Comerica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comerica and Orange County 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 Orange County Bancorp are associated (or correlated) with Comerica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comerica has no effect on the direction of Orange County i.e., Orange County and Comerica go up and down completely randomly.

Pair Corralation between Orange County and Comerica

Considering the 90-day investment horizon Orange County Bancorp is expected to under-perform the Comerica. But the stock apears to be less risky and, when comparing its historical volatility, Orange County Bancorp is 1.06 times less risky than Comerica. The stock trades about -0.11 of its potential returns per unit of risk. The Comerica is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  6,109  in Comerica on December 22, 2024 and sell it today you would lose (204.00) from holding Comerica or give up 3.34% of portfolio value over 90 days.

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

Orange County Bancorp  vs.  Comerica

Orange County Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orange County Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 somewhat strong primary indicators, Comerica is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Orange County and Comerica

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

The idea behind Orange County Bancorp and Comerica 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.