Correlation Between Western Alliance and Regions Financial

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

Diversification Opportunities for Western Alliance and Regions Financial

0.98

Correlation Coefficient

Western Alliance  Regions Financial

Almost no diversification

The 3 months correlation between Western and Regions is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Western Alliance Bancorp. and Regions Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regions Financial 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 Regions Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regions Financial has no effect on the direction of Western Alliance i.e., Western Alliance and Regions Financial go up and down completely randomly.

Pair Corralation between Western Alliance and Regions Financial

Considering the 90-day investment horizon Western Alliance Bancorporation is expected to under-perform the Regions Financial. In addition to that, Western Alliance is 1.4 times more volatile than Regions Financial. It trades about -0.11 of its total potential returns per unit of risk. Regions Financial is currently generating about -0.13 per unit of volatility. If you would invest  2,175  in Regions Financial on January 18, 2025 and sell it today you would lose (244.00) from holding Regions Financial or give up 11.22% of portfolio value over 90 days.

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

Western Alliance Bancorp.  vs.  Regions Financial

Western Alliance Ban

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Alliance Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Regions Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regions Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Western Alliance and Regions Financial

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

The idea behind Western Alliance Bancorporation and Regions Financial 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.