Correlation Between Community West and Home Bancorp
Can any of the company-specific risk be diversified away by investing in both Community West and Home Bancorp 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 Home Bancorp 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 Home Bancorp, you can compare the effects of market volatilities on Community West and Home Bancorp 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 Home Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and Home Bancorp.
Diversification Opportunities for Community West and Home Bancorp
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Community and Home is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home 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 Home Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Bancorp has no effect on the direction of Community West i.e., Community West and Home Bancorp go up and down completely randomly.
Pair Corralation between Community West and Home Bancorp
Given the investment horizon of 90 days Community West Bancshares is expected to generate 4.72 times more return on investment than Home Bancorp. However, Community West is 4.72 times more volatile than Home Bancorp. It trades about 0.06 of its potential returns per unit of risk. Home Bancorp is currently generating about 0.03 per unit of risk. If you would invest 1,345 in Community West Bancshares on August 27, 2024 and sell it today you would earn a total of 837.00 from holding Community West Bancshares or generate 62.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community West Bancshares vs. Home Bancorp
Performance |
| Timeline |
| Community West Bancshares |
| Home Bancorp |
Community West and Home Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and Home Bancorp
The main advantage of trading using opposite Community West and Home Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, Home Bancorp 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 Home Bancorp will offset losses from the drop in Home Bancorp'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 |
| Home Bancorp vs. Home Federal Bancorp | Home Bancorp vs. Community West Bancshares | Home Bancorp vs. First Financial Northwest | Home Bancorp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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