Correlation Between Community West and First National
Can any of the company-specific risk be diversified away by investing in both Community West and First National 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 First National 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 First National Bank, you can compare the effects of market volatilities on Community West and First National 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 First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and First National.
Diversification Opportunities for Community West and First National
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Community and First is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and First National Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Bank has no effect on the direction of Community West i.e., Community West and First National go up and down completely randomly.
Pair Corralation between Community West and First National
Given the investment horizon of 90 days Community West Bancshares is expected to generate 0.52 times more return on investment than First National. However, Community West Bancshares is 1.94 times less risky than First National. It trades about 0.26 of its potential returns per unit of risk. First National Bank is currently generating about 0.07 per unit of risk. If you would invest 2,036 in Community West Bancshares on September 13, 2024 and sell it today you would earn a total of 124.00 from holding Community West Bancshares or generate 6.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community West Bancshares vs. First National Bank
Performance |
| Timeline |
| Community West Bancshares |
| First National Bank |
Community West and First National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and First National
The main advantage of trading using opposite Community West and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, First National 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 First National will offset losses from the drop in First National'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 |
| First National vs. IF Bancorp | First National vs. LINKBANCORP | First National vs. Pathfinder Bancorp | First National vs. First Keystone Corp |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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