Correlation Between South Plains and Comerica

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

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

Diversification Opportunities for South Plains and Comerica

0.91

Correlation Coefficient

South Plains  Comerica

Almost no diversification

The 3 months correlation between South and Comerica is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding South Plains Financial and Comerica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comerica and South Plains 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 South Plains Financial 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 South Plains i.e., South Plains and Comerica go up and down completely randomly.

Pair Corralation between South Plains and Comerica

Given the investment horizon of 90 days South Plains Financial is expected to generate 1.25 times more return on investment than Comerica. However, South Plains is 1.25 times more volatile than Comerica. It trades about 0.1 of its potential returns per unit of risk. Comerica is currently generating about 0.11 per unit of risk. If you would invest  3,305  in South Plains Financial on September 15, 2024 and sell it today you would earn a total of  559.00  from holding South Plains Financial or generate 16.91% return on investment over 90 days.

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

South Plains Financial  vs.  Comerica

South Plains Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in South Plains Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, South Plains demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Comerica

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Comerica are ranked lower than 8 (%) 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.

Pair Trading with South Plains and Comerica

The main advantage of trading using opposite South Plains and Comerica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South Plains 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 South Plains Financial 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.