Correlation Between Community West and Federal Agricultural
Can any of the company-specific risk be diversified away by investing in both Community West and Federal Agricultural 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 Community West and Federal Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Community West Bancshares and Federal Agricultural Mortgage, you can compare the effects of market volatilities on Community West and Federal Agricultural 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 Community West with a short position of Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and Federal Agricultural.
Diversification Opportunities for Community West and Federal Agricultural
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Community and Federal is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and Community West 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 Community West Bancshares are associated (or correlated) with Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of Community West i.e., Community West and Federal Agricultural go up and down completely randomly.
Pair Corralation between Community West and Federal Agricultural
Given the investment horizon of 90 days Community West Bancshares is expected to generate 2.85 times more return on investment than Federal Agricultural. However, Community West is 2.85 times more volatile than Federal Agricultural Mortgage. It trades about 0.06 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about 0.07 per unit of risk. If you would invest 1,136 in Community West Bancshares on August 31, 2024 and sell it today you would earn a total of 1,056 from holding Community West Bancshares or generate 92.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community West Bancshares vs. Federal Agricultural Mortgage
Performance |
| Timeline |
| Community West Bancshares |
| Federal Agricultural |
Community West and Federal Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and Federal Agricultural
The main advantage of trading using opposite Community West and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, Federal Agricultural 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 Federal Agricultural will offset losses from the drop in Federal Agricultural's long position.| Community West vs. KeyCorp | Community West vs. Comerica | Community West vs. First Horizon National | Community West vs. Western Alliance Bancorporation |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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