Correlation Between Western Alliance and Pinnacle Bank

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

Diversification Opportunities for Western Alliance and Pinnacle Bank

0.38

Correlation Coefficient

Western Alliance  Pinnacle Bank

Weak diversification

The 3 months correlation between Western and Pinnacle is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Western Alliance Bancorp. and Pinnacle Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle Bank 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 Pinnacle Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle Bank has no effect on the direction of Western Alliance i.e., Western Alliance and Pinnacle Bank go up and down completely randomly.

Pair Corralation between Western Alliance and Pinnacle Bank

Considering the 90-day investment horizon Western Alliance Bancorporation is expected to under-perform the Pinnacle Bank. In addition to that, Western Alliance is 3.3 times more volatile than Pinnacle Bank. It trades about -0.04 of its total potential returns per unit of risk. Pinnacle Bank is currently generating about -0.06 per unit of volatility. If you would invest  1,939  in Pinnacle Bank on December 2, 2024 and sell it today you would lose (49.00) from holding Pinnacle Bank or give up 2.53% of portfolio value over 90 days.

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

Western Alliance Bancorp.  vs.  Pinnacle Bank

Western Alliance Ban

Risk-Adjusted Performance

Very 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.

Pinnacle Bank

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Western Alliance and Pinnacle Bank

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

The idea behind Western Alliance Bancorporation and Pinnacle Bank 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.