Correlation Between Valley National and Comerica

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

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

Diversification Opportunities for Valley National and Comerica

0.86

Correlation Coefficient

Valley National  Comerica

Very poor diversification

The 3 months correlation between Valley and Comerica is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Valley National Bancorp and Comerica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comerica and Valley National 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 Valley National 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 Valley National i.e., Valley National and Comerica go up and down completely randomly.

Pair Corralation between Valley National and Comerica

Considering the 90-day investment horizon Valley National Bancorp is expected to generate 1.09 times more return on investment than Comerica. However, Valley National is 1.09 times more volatile than Comerica. It trades about 0.01 of its potential returns per unit of risk. Comerica is currently generating about -0.01 per unit of risk. If you would invest  900.00  in Valley National Bancorp on December 28, 2024 and sell it today you would lose (2.00) from holding Valley National Bancorp or give up 0.22% of portfolio value over 90 days.

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

Valley National Bancorp  vs.  Comerica

Valley National Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valley National Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Valley National is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the 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 Valley National and Comerica

The main advantage of trading using opposite Valley National and Comerica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valley National 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 Valley National 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.