Correlation Between Community West and First Guaranty
Can any of the company-specific risk be diversified away by investing in both Community West and First Guaranty 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 Guaranty 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 Guaranty Bancshares, you can compare the effects of market volatilities on Community West and First Guaranty 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 Guaranty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and First Guaranty.
Diversification Opportunities for Community West and First Guaranty
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Community and First is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and First Guaranty Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Guaranty Bancshares 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 Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Guaranty Bancshares has no effect on the direction of Community West i.e., Community West and First Guaranty go up and down completely randomly.
Pair Corralation between Community West and First Guaranty
Given the investment horizon of 90 days Community West is expected to generate 2.8 times less return on investment than First Guaranty. But when comparing it to its historical volatility, Community West Bancshares is 1.35 times less risky than First Guaranty. It trades about 0.02 of its potential returns per unit of risk. First Guaranty Bancshares is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,027 in First Guaranty Bancshares on October 24, 2024 and sell it today you would earn a total of 55.00 from holding First Guaranty Bancshares or generate 5.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community West Bancshares vs. First Guaranty Bancshares
Performance |
| Timeline |
| Community West Bancshares |
| First Guaranty Bancshares |
Community West and First Guaranty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and First Guaranty
The main advantage of trading using opposite Community West and First Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, First Guaranty 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 Guaranty will offset losses from the drop in First Guaranty'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 Guaranty vs. Community West Bancshares | First Guaranty vs. First Northwest Bancorp | First Guaranty vs. First Financial Northwest | First Guaranty vs. Great Southern 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 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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