Correlation Between Community West and Macatawa Bank
Can any of the company-specific risk be diversified away by investing in both Community West and Macatawa Bank 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 Macatawa Bank 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 Macatawa Bank, you can compare the effects of market volatilities on Community West and Macatawa Bank 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 Macatawa Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and Macatawa Bank.
Diversification Opportunities for Community West and Macatawa Bank
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Community and Macatawa is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Macatawa Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macatawa Bank 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 Macatawa Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macatawa Bank has no effect on the direction of Community West i.e., Community West and Macatawa Bank go up and down completely randomly.
Pair Corralation between Community West and Macatawa Bank
Given the investment horizon of 90 days Community West Bancshares is expected to generate 1.89 times more return on investment than Macatawa Bank. However, Community West is 1.89 times more volatile than Macatawa Bank. It trades about 0.06 of its potential returns per unit of risk. Macatawa Bank is currently generating about -0.02 per unit of risk. If you would invest 1,345 in Community West Bancshares on August 28, 2024 and sell it today you would earn a total of 885.00 from holding Community West Bancshares or generate 65.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 83.84% |
| Values | Daily Returns |
Community West Bancshares vs. Macatawa Bank
Performance |
| Timeline |
| Community West Bancshares |
| Macatawa Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Community West and Macatawa Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and Macatawa Bank
The main advantage of trading using opposite Community West and Macatawa Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, Macatawa Bank 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 Macatawa Bank will offset losses from the drop in Macatawa Bank'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 |
| Macatawa Bank vs. Home Federal Bancorp | Macatawa Bank vs. First Capital | Macatawa Bank vs. Magyar Bancorp | Macatawa Bank vs. Community West 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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