Correlation Between Community West and Mainstreet Bank
Can any of the company-specific risk be diversified away by investing in both Community West and Mainstreet 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 Mainstreet 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 Mainstreet Bank, you can compare the effects of market volatilities on Community West and Mainstreet 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 Mainstreet Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and Mainstreet Bank.
Diversification Opportunities for Community West and Mainstreet Bank
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Community and Mainstreet is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Mainstreet Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstreet 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 Mainstreet Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstreet Bank has no effect on the direction of Community West i.e., Community West and Mainstreet Bank go up and down completely randomly.
Pair Corralation between Community West and Mainstreet Bank
Given the investment horizon of 90 days Community West Bancshares is expected to generate 0.92 times more return on investment than Mainstreet Bank. However, Community West Bancshares is 1.08 times less risky than Mainstreet Bank. It trades about 0.08 of its potential returns per unit of risk. Mainstreet Bank is currently generating about -0.18 per unit of risk. If you would invest 1,905 in Community West Bancshares on November 3, 2024 and sell it today you would earn a total of 44.00 from holding Community West Bancshares or generate 2.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community West Bancshares vs. Mainstreet Bank
Performance |
| Timeline |
| Community West Bancshares |
| Mainstreet Bank |
Community West and Mainstreet Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and Mainstreet Bank
The main advantage of trading using opposite Community West and Mainstreet Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, Mainstreet 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 Mainstreet Bank will offset losses from the drop in Mainstreet Bank's long position.| Community West vs. US Bancorp | Community West vs. Truist Financial Corp | Community West vs. Fifth Third Bancorp | Community West vs. KeyCorp |
| Mainstreet Bank vs. Oak Valley Bancorp | Mainstreet Bank vs. Home Federal Bancorp | Mainstreet Bank vs. LINKBANCORP | Mainstreet Bank vs. First Northwest 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 Stocks Directory module to find actively traded stocks across global markets.
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