Correlation Between Western Alliance and First Niles

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

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

Diversification Opportunities for Western Alliance and First Niles

0.05

Correlation Coefficient

Western Alliance  First Niles

Significant diversification

The 3 months correlation between Western and First is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Western Alliance Bancorp. and First Niles Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Niles Financial and Western Alliance 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 Western Alliance Bancorporation are associated (or correlated) with First Niles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Niles Financial has no effect on the direction of Western Alliance i.e., Western Alliance and First Niles go up and down completely randomly.

Pair Corralation between Western Alliance and First Niles

Considering the 90-day investment horizon Western Alliance Bancorporation is expected to generate 9.47 times more return on investment than First Niles. However, Western Alliance is 9.47 times more volatile than First Niles Financial. It trades about 0.04 of its potential returns per unit of risk. First Niles Financial is currently generating about -0.22 per unit of risk. If you would invest  5,547  in Western Alliance Bancorporation on September 21, 2024 and sell it today you would earn a total of  2,739  from holding Western Alliance Bancorporation or generate 49.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	5.25%
Values	Daily Returns

Western Alliance Bancorp.  vs.  First Niles Financial

Western Alliance Ban

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Western Alliance Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Western Alliance is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

First Niles Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Niles Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, First Niles is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Western Alliance and First Niles

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

The idea behind Western Alliance Bancorporation and First Niles Financial 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.