Correlation Between Third Coast and Comerica

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

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

Diversification Opportunities for Third Coast and Comerica

0.91

Correlation Coefficient

Third Coast  Comerica

Almost no diversification

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

Pair Corralation between Third Coast and Comerica

Given the investment horizon of 90 days Third Coast Bancshares is expected to generate 1.2 times more return on investment than Comerica. However, Third Coast is 1.2 times more volatile than Comerica. It trades about 0.17 of its potential returns per unit of risk. Comerica is currently generating about -0.12 per unit of risk. If you would invest  3,458  in Third Coast Bancshares on September 16, 2024 and sell it today you would earn a total of  190.00  from holding Third Coast Bancshares or generate 5.49% return on investment over 90 days.

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

Third Coast Bancshares  vs.  Comerica

Third Coast Bancshares

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Third Coast Bancshares are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Third Coast showed 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 weak primary indicators, Comerica sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Third Coast and Comerica

The main advantage of trading using opposite Third Coast and Comerica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Third Coast 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 Third Coast Bancshares 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.