Correlation Between Western Alliance and Middlebury National

Can any of the company-specific risk be diversified away by investing in both Western Alliance and Middlebury National 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 Middlebury National 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 Middlebury National, you can compare the effects of market volatilities on Western Alliance and Middlebury National 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 Middlebury National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Alliance and Middlebury National.

Diversification Opportunities for Western Alliance and Middlebury National

-0.12

Correlation Coefficient

Western Alliance  Middlebury National

Good diversification

The 3 months correlation between Western and Middlebury is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Western Alliance Bancorp. and Middlebury National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middlebury National 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 Middlebury National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middlebury National has no effect on the direction of Western Alliance i.e., Western Alliance and Middlebury National go up and down completely randomly.

Pair Corralation between Western Alliance and Middlebury National

Considering the 90-day investment horizon Western Alliance Bancorporation is expected to generate 0.9 times more return on investment than Middlebury National. However, Western Alliance Bancorporation is 1.11 times less risky than Middlebury National. It trades about 0.15 of its potential returns per unit of risk. Middlebury National is currently generating about 0.01 per unit of risk. If you would invest  8,482  in Western Alliance Bancorporation on October 23, 2024 and sell it today you would earn a total of  491.00  from holding Western Alliance Bancorporation or generate 5.79% return on investment over 90 days.

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

Western Alliance Bancorp.  vs.  Middlebury National

Western Alliance Ban

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Alliance Bancorporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Western Alliance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Middlebury National

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Middlebury National are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Middlebury National unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Alliance and Middlebury National

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

The idea behind Western Alliance Bancorporation and Middlebury National 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.