Correlation Between Community West and Merchants Marine
Can any of the company-specific risk be diversified away by investing in both Community West and Merchants Marine 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 Merchants Marine 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 Merchants Marine Bancorp, you can compare the effects of market volatilities on Community West and Merchants Marine 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 Merchants Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and Merchants Marine.
Diversification Opportunities for Community West and Merchants Marine
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Community and Merchants is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Merchants Marine Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Marine 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 Merchants Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Marine Bancorp has no effect on the direction of Community West i.e., Community West and Merchants Marine go up and down completely randomly.
Pair Corralation between Community West and Merchants Marine
Given the investment horizon of 90 days Community West Bancshares is expected to generate 1.17 times more return on investment than Merchants Marine. However, Community West is 1.17 times more volatile than Merchants Marine Bancorp. It trades about 0.08 of its potential returns per unit of risk. Merchants Marine Bancorp is currently generating about -0.03 per unit of risk. If you would invest 1,437 in Community West Bancshares on September 3, 2024 and sell it today you would earn a total of 771.00 from holding Community West Bancshares or generate 53.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 62.75% |
| Values | Daily Returns |
Community West Bancshares vs. Merchants Marine Bancorp
Performance |
| Timeline |
| Community West Bancshares |
| Merchants Marine Bancorp |
Community West and Merchants Marine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and Merchants Marine
The main advantage of trading using opposite Community West and Merchants Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, Merchants Marine 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 Merchants Marine will offset losses from the drop in Merchants Marine's long position.| Community West vs. JPMorgan Chase Co | Community West vs. Citigroup | Community West vs. Wells Fargo | Community West vs. Toronto Dominion Bank |
| Merchants Marine vs. Mission Valley Bancorp | Merchants Marine vs. Harbor Bankshares | Merchants Marine vs. Oconee Financial | Merchants Marine vs. MF Bancorp |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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