Correlation Between Western Alliance and Wintrust Financial

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

Diversification Opportunities for Western Alliance and Wintrust Financial

0.49

Correlation Coefficient

Western Alliance  Wintrust Financial

Very weak diversification

The 3 months correlation between Western and Wintrust is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Western Alliance Bancorp. and Wintrust Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wintrust Financial 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 Wintrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wintrust Financial Corp has no effect on the direction of Western Alliance i.e., Western Alliance and Wintrust Financial go up and down completely randomly.

Pair Corralation between Western Alliance and Wintrust Financial

Assuming the 90 days trading horizon Western Alliance Bancorporation is expected to generate 3.95 times more return on investment than Wintrust Financial. However, Western Alliance is 3.95 times more volatile than Wintrust Financial Corp. It trades about 0.16 of its potential returns per unit of risk. Wintrust Financial Corp is currently generating about 0.11 per unit of risk. If you would invest  1,766  in Western Alliance Bancorporation on September 13, 2024 and sell it today you would earn a total of  440.00  from holding Western Alliance Bancorporation or generate 24.92% return on investment over 90 days.

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

Western Alliance Bancorp.  vs.  Wintrust Financial Corp

Western Alliance Ban

Risk-Adjusted Performance

5 of 100

Modest

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 somewhat strong essential indicators, Western Alliance is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Wintrust Financial Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wintrust Financial Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Wintrust Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Western Alliance and Wintrust Financial

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

The idea behind Western Alliance Bancorporation and Wintrust Financial 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.