Correlation Between Community West and First Of

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Can any of the company-specific risk be diversified away by investing in both Community West and First Of 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 Of 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 of Long, you can compare the effects of market volatilities on Community West and First Of 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 Of. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and First Of.

Diversification Opportunities for Community West and First Of

CommunityFirstDiversified AwayCommunityFirstDiversified Away100%
0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Community and First is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and First of Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First of Long 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 Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First of Long has no effect on the direction of Community West i.e., Community West and First Of go up and down completely randomly.

Pair Corralation between Community West and First Of

Given the investment horizon of 90 days Community West Bancshares is expected to under-perform the First Of. But the stock apears to be less risky and, when comparing its historical volatility, Community West Bancshares is 1.8 times less risky than First Of. The stock trades about -0.08 of its potential returns per unit of risk. The First of Long is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,190  in First of Long on November 25, 2024 and sell it today you would earn a total of  106.00  from holding First of Long or generate 8.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Community West Bancshares  vs.  First of Long

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -20-15-10-505
JavaScript chart by amCharts 3.21.15CWBC FLIC
       Timeline  
Community West Bancshares 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Community West Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1819202122
First of Long 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days First of Long has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1111.51212.51313.51414.5

Community West and First Of Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.28-1.74-1.2-0.66-0.120.380.921.462.02.54 0.100.150.20
JavaScript chart by amCharts 3.21.15CWBC FLIC
       Returns  

Pair Trading with Community West and First Of

The main advantage of trading using opposite Community West and First Of positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, First Of 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 Of will offset losses from the drop in First Of's long position.
The idea behind Community West Bancshares and First of Long pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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