Correlation Between BOC Hong and Community West
Can any of the company-specific risk be diversified away by investing in both BOC Hong and Community West 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 BOC Hong and Community West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BOC Hong Kong and Community West Bancshares, you can compare the effects of market volatilities on BOC Hong and Community West 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 BOC Hong with a short position of Community West. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOC Hong and Community West.
Diversification Opportunities for BOC Hong and Community West
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BOC and Community is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding BOC Hong Kong and Community West Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community West Bancshares and BOC Hong 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 BOC Hong Kong are associated (or correlated) with Community West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community West Bancshares has no effect on the direction of BOC Hong i.e., BOC Hong and Community West go up and down completely randomly.
Pair Corralation between BOC Hong and Community West
Assuming the 90 days horizon BOC Hong is expected to generate 12.01 times less return on investment than Community West. But when comparing it to its historical volatility, BOC Hong Kong is 7.82 times less risky than Community West. It trades about 0.04 of its potential returns per unit of risk. Community West Bancshares is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,345 in Community West Bancshares on August 27, 2024 and sell it today you would earn a total of 837.00 from holding Community West Bancshares or generate 62.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BOC Hong Kong vs. Community West Bancshares
Performance |
| Timeline |
| BOC Hong Kong |
| Community West Bancshares |
BOC Hong and Community West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BOC Hong and Community West
The main advantage of trading using opposite BOC Hong and Community West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOC Hong position performs unexpectedly, Community West 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 Community West will offset losses from the drop in Community West's long position.The idea behind BOC Hong Kong and Community West Bancshares 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.| Community West vs. Home Federal Bancorp | Community West vs. Magyar Bancorp | Community West vs. First Northwest Bancorp | Community West vs. First Financial Northwest |
Check out your portfolio center.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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