Correlation Between Community West and Farmers Merchants
Can any of the company-specific risk be diversified away by investing in both Community West and Farmers Merchants 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 Farmers Merchants 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 Farmers Merchants Bancorp, you can compare the effects of market volatilities on Community West and Farmers Merchants 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 Farmers Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and Farmers Merchants.
Diversification Opportunities for Community West and Farmers Merchants
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Community and Farmers is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Farmers Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Merchants Bancorp 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 Farmers Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Merchants Bancorp has no effect on the direction of Community West i.e., Community West and Farmers Merchants go up and down completely randomly.
Pair Corralation between Community West and Farmers Merchants
Given the investment horizon of 90 days Community West Bancshares is expected to generate 0.61 times more return on investment than Farmers Merchants. However, Community West Bancshares is 1.63 times less risky than Farmers Merchants. It trades about -0.14 of its potential returns per unit of risk. Farmers Merchants Bancorp is currently generating about -0.22 per unit of risk. If you would invest 1,929 in Community West Bancshares on November 28, 2024 and sell it today you would lose (64.00) from holding Community West Bancshares or give up 3.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community West Bancshares vs. Farmers Merchants Bancorp
Performance |
| Timeline |
| Community West Bancshares |
| Farmers Merchants Bancorp |
Community West and Farmers Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and Farmers Merchants
The main advantage of trading using opposite Community West and Farmers Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, Farmers Merchants 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 Farmers Merchants will offset losses from the drop in Farmers Merchants' long position.| Community West vs. Home Federal Bancorp | Community West vs. First Financial Northwest | Community West vs. First Northwest Bancorp | Community West vs. Magyar Bancorp |
| Farmers Merchants vs. Home Federal Bancorp | Farmers Merchants vs. First Financial Northwest | Farmers Merchants vs. First Northwest Bancorp | Farmers Merchants vs. First Capital |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Stocks Directory Find actively traded stocks across global markets | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |