Correlation Between Community West and FNB
Can any of the company-specific risk be diversified away by investing in both Community West and FNB 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 FNB 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 FNB Inc, you can compare the effects of market volatilities on Community West and FNB 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 FNB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and FNB.
Diversification Opportunities for Community West and FNB
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Community and FNB is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and FNB Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNB Inc 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 FNB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNB Inc has no effect on the direction of Community West i.e., Community West and FNB go up and down completely randomly.
Pair Corralation between Community West and FNB
Given the investment horizon of 90 days Community West Bancshares is expected to generate 2.34 times more return on investment than FNB. However, Community West is 2.34 times more volatile than FNB Inc. It trades about 0.42 of its potential returns per unit of risk. FNB Inc is currently generating about 0.22 per unit of risk. If you would invest 1,863 in Community West Bancshares on September 1, 2024 and sell it today you would earn a total of 329.00 from holding Community West Bancshares or generate 17.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community West Bancshares vs. FNB Inc
Performance |
| Timeline |
| Community West Bancshares |
| FNB Inc |
Community West and FNB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and FNB
The main advantage of trading using opposite Community West and FNB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, FNB 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 FNB will offset losses from the drop in FNB'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 |
| FNB vs. Century Financial Corp | FNB vs. Apollo Bancorp | FNB vs. Commercial National Financial | FNB vs. Eastern Michigan Financial |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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