Correlation Between Washington Business and Comerica

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

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

Diversification Opportunities for Washington Business and Comerica

0.39

Correlation Coefficient

Washington Business  Comerica

Weak diversification

The 3 months correlation between Washington and Comerica is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Washington Business Bank and Comerica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comerica and Washington Business 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 Washington Business Bank 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 Washington Business i.e., Washington Business and Comerica go up and down completely randomly.

Pair Corralation between Washington Business and Comerica

Given the investment horizon of 90 days Washington Business Bank is expected to generate 0.55 times more return on investment than Comerica. However, Washington Business Bank is 1.82 times less risky than Comerica. It trades about 0.28 of its potential returns per unit of risk. Comerica is currently generating about 0.03 per unit of risk. If you would invest  3,275  in Washington Business Bank on October 25, 2024 and sell it today you would earn a total of  325.00  from holding Washington Business Bank or generate 9.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	45.76%
Values	Daily Returns

Washington Business Bank  vs.  Comerica

Washington Business Bank

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Washington Business Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat inconsistent basic indicators, Washington Business sustained solid returns over the last few months and may actually be approaching a breakup point.

Comerica

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Comerica are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Washington Business and Comerica

The main advantage of trading using opposite Washington Business and Comerica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Business 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 Washington Business Bank 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.