Correlation Between Comerica and Signature Bank

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

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

Diversification Opportunities for Comerica and Signature Bank

0.46

Correlation Coefficient

Comerica  Signature Bank

Very weak diversification

The 3 months correlation between Comerica and Signature is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Comerica and Signature Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signature Bank and Comerica 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 Comerica are associated (or correlated) with Signature Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signature Bank has no effect on the direction of Comerica i.e., Comerica and Signature Bank go up and down completely randomly.

Pair Corralation between Comerica and Signature Bank

If you would invest  5,414  in Comerica on September 4, 2024 and sell it today you would earn a total of  1,690  from holding Comerica or generate 31.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Comerica  vs.  Signature Bank

Comerica

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Comerica are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady primary indicators, Comerica sustained solid returns over the last few months and may actually be approaching a breakup point.

Signature Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Signature Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Signature Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Comerica and Signature Bank

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

The idea behind Comerica and Signature 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.