Correlation Between Community West and Orange County
Can any of the company-specific risk be diversified away by investing in both Community West and Orange County 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 Orange County 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 Orange County Bancorp, you can compare the effects of market volatilities on Community West and Orange County 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 Orange County. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and Orange County.
Diversification Opportunities for Community West and Orange County
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Community and Orange is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Orange County Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange County 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 Orange County. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange County Bancorp has no effect on the direction of Community West i.e., Community West and Orange County go up and down completely randomly.
Pair Corralation between Community West and Orange County
Given the investment horizon of 90 days Community West Bancshares is expected to generate 0.55 times more return on investment than Orange County. However, Community West Bancshares is 1.81 times less risky than Orange County. It trades about 0.41 of its potential returns per unit of risk. Orange County Bancorp is currently generating about 0.04 per unit of risk. If you would invest 1,861 in Community West Bancshares on August 29, 2024 and sell it today you would earn a total of 345.00 from holding Community West Bancshares or generate 18.54% 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. Orange County Bancorp
Performance |
| Timeline |
| Community West Bancshares |
| Orange County Bancorp |
Community West and Orange County Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and Orange County
The main advantage of trading using opposite Community West and Orange County positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, Orange County 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 Orange County will offset losses from the drop in Orange County'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 |
| Orange County vs. Southern States Bancshares | Orange County vs. US Century Bank | Orange County vs. Third Coast Bancshares | Orange County vs. Esquire Financial Holdings |
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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