Correlation Between Community West and Community First
Can any of the company-specific risk be diversified away by investing in both Community West and Community First 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 Community First 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 Community First Bancorporation, you can compare the effects of market volatilities on Community West and Community First 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 Community First. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and Community First.
Diversification Opportunities for Community West and Community First
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Community and Community is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Community First Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community First Banc 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 Community First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community First Banc has no effect on the direction of Community West i.e., Community West and Community First go up and down completely randomly.
Pair Corralation between Community West and Community First
Given the investment horizon of 90 days Community West is expected to generate 1.0 times less return on investment than Community First. But when comparing it to its historical volatility, Community West Bancshares is 1.04 times less risky than Community First. It trades about 0.08 of its potential returns per unit of risk. Community First Bancorporation is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 605.00 in Community First Bancorporation on September 3, 2024 and sell it today you would earn a total of 195.00 from holding Community First Bancorporation or generate 32.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 65.99% |
| Values | Daily Returns |
Community West Bancshares vs. Community First Bancorp.
Performance |
| Timeline |
| Community West Bancshares |
| Community First Banc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Community West and Community First Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and Community First
The main advantage of trading using opposite Community West and Community First positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, Community First 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 First will offset losses from the drop in Community First's long position.| Community West vs. JPMorgan Chase Co | Community West vs. Citigroup | Community West vs. Wells Fargo | Community West vs. Toronto Dominion Bank |
| Community First vs. Citizens Financial Corp | Community First vs. Croghan Bancshares | Community First vs. Commercial National Financial | Community First vs. CCFNB Bancorp |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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