Correlation Between Community West and China Merchants
Can any of the company-specific risk be diversified away by investing in both Community West and China Merchants 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 China Merchants 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 China Merchants Bank, you can compare the effects of market volatilities on Community West and China Merchants 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 China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and China Merchants.
Diversification Opportunities for Community West and China Merchants
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Community and China is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and China Merchants Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Bank 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 China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Bank has no effect on the direction of Community West i.e., Community West and China Merchants go up and down completely randomly.
Pair Corralation between Community West and China Merchants
Given the investment horizon of 90 days Community West Bancshares is expected to generate 1.77 times more return on investment than China Merchants. However, Community West is 1.77 times more volatile than China Merchants Bank. It trades about 0.06 of its potential returns per unit of risk. China Merchants Bank is currently generating about 0.02 per unit of risk. 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 | 68.75% |
| Values | Daily Returns |
Community West Bancshares vs. China Merchants Bank
Performance |
| Timeline |
| Community West Bancshares |
| China Merchants Bank |
Community West and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and China Merchants
The main advantage of trading using opposite Community West and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, China Merchants 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 China Merchants will offset losses from the drop in China Merchants' 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 |
| China Merchants vs. China Everbright Bank | China Merchants vs. Postal Savings Bank | China Merchants vs. China Citic Bank | China Merchants vs. China Merchants Bank |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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