Correlation Between Community West and Cathay General
Can any of the company-specific risk be diversified away by investing in both Community West and Cathay General 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 Cathay General 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 Cathay General Bancorp, you can compare the effects of market volatilities on Community West and Cathay General 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 Cathay General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and Cathay General.
Diversification Opportunities for Community West and Cathay General
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Community and Cathay is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Cathay General Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay General Bancorp 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 Cathay General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay General Bancorp has no effect on the direction of Community West i.e., Community West and Cathay General go up and down completely randomly.
Pair Corralation between Community West and Cathay General
Given the investment horizon of 90 days Community West Bancshares is expected to generate 0.57 times more return on investment than Cathay General. However, Community West Bancshares is 1.77 times less risky than Cathay General. It trades about 0.42 of its potential returns per unit of risk. Cathay General Bancorp is currently generating about 0.19 per unit of risk. If you would invest 1,861 in Community West Bancshares on August 29, 2024 and sell it today you would earn a total of 343.00 from holding Community West Bancshares or generate 18.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community West Bancshares vs. Cathay General Bancorp
Performance |
| Timeline |
| Community West Bancshares |
| Cathay General Bancorp |
Community West and Cathay General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and Cathay General
The main advantage of trading using opposite Community West and Cathay General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, Cathay General 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 Cathay General will offset losses from the drop in Cathay General's long position.| Community West vs. Home Federal Bancorp | Community West vs. Magyar Bancorp | Community West vs. First Northwest Bancorp | Community West vs. First Financial Northwest |
| Cathay General vs. Glacier Bancorp | Cathay General vs. Capitol Federal Financial | Cathay General vs. Byline Bancorp | Cathay General vs. First Financial Bankshares |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |