Correlation Between Community West and Lakeland Financial
Can any of the company-specific risk be diversified away by investing in both Community West and Lakeland Financial 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 Lakeland Financial 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 Lakeland Financial, you can compare the effects of market volatilities on Community West and Lakeland Financial 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 Lakeland Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and Lakeland Financial.
Diversification Opportunities for Community West and Lakeland Financial
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Community and Lakeland is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Lakeland Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakeland Financial 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 Lakeland Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakeland Financial has no effect on the direction of Community West i.e., Community West and Lakeland Financial go up and down completely randomly.
Pair Corralation between Community West and Lakeland Financial
Given the investment horizon of 90 days Community West Bancshares is expected to generate 2.45 times more return on investment than Lakeland Financial. However, Community West is 2.45 times more volatile than Lakeland Financial. It trades about 0.06 of its potential returns per unit of risk. Lakeland Financial is currently generating about 0.05 per unit of risk. If you would invest 1,098 in Community West Bancshares on September 2, 2024 and sell it today you would earn a total of 1,094 from holding Community West Bancshares or generate 99.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community West Bancshares vs. Lakeland Financial
Performance |
| Timeline |
| Community West Bancshares |
| Lakeland Financial |
Community West and Lakeland Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and Lakeland Financial
The main advantage of trading using opposite Community West and Lakeland Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, Lakeland Financial 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 Lakeland Financial will offset losses from the drop in Lakeland Financial's long position.| Community West vs. Affinity Bancshares | Community West vs. Auburn National Bancorporation | Community West vs. BayCom Corp | Community West vs. First Community |
| Lakeland Financial vs. Home Bancorp | Lakeland Financial vs. Heritage Financial | Lakeland Financial vs. First Northwest Bancorp | Lakeland Financial vs. HomeTrust Bancshares |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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