Correlation Between Colony Bankcorp and Community West
Can any of the company-specific risk be diversified away by investing in both Colony Bankcorp 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 Colony Bankcorp and Community West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colony Bankcorp and Community West Bancshares, you can compare the effects of market volatilities on Colony Bankcorp 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 Colony Bankcorp with a short position of Community West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colony Bankcorp and Community West.
Diversification Opportunities for Colony Bankcorp and Community West
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Colony and Community is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Colony Bankcorp 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 Colony Bankcorp 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 Colony Bankcorp 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 Colony Bankcorp i.e., Colony Bankcorp and Community West go up and down completely randomly.
Pair Corralation between Colony Bankcorp and Community West
Given the investment horizon of 90 days Colony Bankcorp is expected to generate 1.45 times more return on investment than Community West. However, Colony Bankcorp is 1.45 times more volatile than Community West Bancshares. It trades about 0.16 of its potential returns per unit of risk. Community West Bancshares is currently generating about 0.21 per unit of risk. If you would invest 1,541 in Colony Bankcorp on August 29, 2024 and sell it today you would earn a total of 249.00 from holding Colony Bankcorp or generate 16.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Colony Bankcorp vs. Community West Bancshares
Performance |
| Timeline |
| Colony Bankcorp |
| Community West Bancshares |
Colony Bankcorp and Community West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colony Bankcorp and Community West
The main advantage of trading using opposite Colony Bankcorp and Community West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colony Bankcorp 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.| Colony Bankcorp vs. Home Federal Bancorp | Colony Bankcorp vs. First Financial Northwest | Colony Bankcorp vs. First Northwest Bancorp | Colony Bankcorp vs. First Capital |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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