Correlation Between Western Alliance and Southeastern Banking

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

Diversification Opportunities for Western Alliance and Southeastern Banking

0.31

Correlation Coefficient

Western Alliance  Southeastern Banking

Weak diversification

The 3 months correlation between Western and Southeastern is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Western Alliance Bancorp. and Southeastern Banking Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southeastern Banking Corp 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 Southeastern Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southeastern Banking Corp has no effect on the direction of Western Alliance i.e., Western Alliance and Southeastern Banking go up and down completely randomly.

Pair Corralation between Western Alliance and Southeastern Banking

Considering the 90-day investment horizon Western Alliance Bancorporation is expected to under-perform the Southeastern Banking. But the stock apears to be less risky and, when comparing its historical volatility, Western Alliance Bancorporation is 1.31 times less risky than Southeastern Banking. The stock trades about -0.06 of its potential returns per unit of risk. The Southeastern Banking Corp is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  2,227  in Southeastern Banking Corp on September 13, 2024 and sell it today you would earn a total of  273.00  from holding Southeastern Banking Corp or generate 12.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

Western Alliance Bancorp.  vs.  Southeastern Banking Corp

Western Alliance Ban

Risk-Adjusted Performance

5 of 100

OK

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 weak basic indicators, Western Alliance disclosed solid returns over the last few months and may actually be approaching a breakup point.

Southeastern Banking Corp

Risk-Adjusted Performance

22 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Southeastern Banking Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, Southeastern Banking exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Alliance and Southeastern Banking

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

The idea behind Western Alliance Bancorporation and Southeastern Banking Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.