Correlation Between Central Pacific and Comerica

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

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

Diversification Opportunities for Central Pacific and Comerica

0.89

Correlation Coefficient

Central Pacific  Comerica

Very poor diversification

The 3 months correlation between Central and Comerica is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Central Pacific Financial and Comerica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comerica and Central Pacific 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 Central Pacific Financial 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 Central Pacific i.e., Central Pacific and Comerica go up and down completely randomly.

Pair Corralation between Central Pacific and Comerica

Considering the 90-day investment horizon Central Pacific is expected to generate 1.75 times less return on investment than Comerica. In addition to that, Central Pacific is 1.3 times more volatile than Comerica. It trades about 0.09 of its total potential returns per unit of risk. Comerica is currently generating about 0.21 per unit of volatility. 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	Strong
Accuracy	100.0%
Values	Daily Returns

Central Pacific Financial  vs.  Comerica

Central Pacific Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Central Pacific Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Central Pacific reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Central Pacific and Comerica

The main advantage of trading using opposite Central Pacific and Comerica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Pacific 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 Central Pacific Financial 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 Transaction History module to view history of all your transactions and understand their impact on performance.