Correlation Between Community West and First Capital
Can any of the company-specific risk be diversified away by investing in both Community West and First Capital 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 Capital 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 Capital, you can compare the effects of market volatilities on Community West and First Capital 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 Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and First Capital.
Diversification Opportunities for Community West and First Capital
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Community and First is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and First Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital 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 Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Capital has no effect on the direction of Community West i.e., Community West and First Capital go up and down completely randomly.
Pair Corralation between Community West and First Capital
Given the investment horizon of 90 days Community West is expected to generate 7.57 times less return on investment than First Capital. But when comparing it to its historical volatility, Community West Bancshares is 1.6 times less risky than First Capital. It trades about 0.06 of its potential returns per unit of risk. First Capital is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 3,106 in First Capital on November 18, 2024 and sell it today you would earn a total of 393.00 from holding First Capital or generate 12.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community West Bancshares vs. First Capital
Performance |
| Timeline |
| Community West Bancshares |
| First Capital |
Community West and First Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and First Capital
The main advantage of trading using opposite Community West and First Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, First Capital 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 Capital will offset losses from the drop in First Capital'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 Capital vs. Home Federal Bancorp | First Capital vs. First Financial Northwest | First Capital vs. First Northwest Bancorp | First Capital vs. Community West Bancshares |
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 CEOs Directory module to screen CEOs from public companies around the world.
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