Correlation Between Community West and Oak Valley
Can any of the company-specific risk be diversified away by investing in both Community West and Oak Valley 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 Oak Valley 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 Oak Valley Bancorp, you can compare the effects of market volatilities on Community West and Oak Valley 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 Oak Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and Oak Valley.
Diversification Opportunities for Community West and Oak Valley
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Community and Oak is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Oak Valley Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oak Valley 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 Oak Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oak Valley Bancorp has no effect on the direction of Community West i.e., Community West and Oak Valley go up and down completely randomly.
Pair Corralation between Community West and Oak Valley
Given the investment horizon of 90 days Community West Bancshares is expected to generate 0.82 times more return on investment than Oak Valley. However, Community West Bancshares is 1.22 times less risky than Oak Valley. It trades about 0.07 of its potential returns per unit of risk. Oak Valley Bancorp is currently generating about -0.16 per unit of risk. If you would invest 1,905 in Community West Bancshares on November 2, 2024 and sell it today you would earn a total of 34.00 from holding Community West Bancshares or generate 1.78% 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. Oak Valley Bancorp
Performance |
| Timeline |
| Community West Bancshares |
| Oak Valley Bancorp |
Community West and Oak Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and Oak Valley
The main advantage of trading using opposite Community West and Oak Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, Oak Valley 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 Oak Valley will offset losses from the drop in Oak Valley's long position.| Community West vs. Home Federal Bancorp | Community West vs. Magyar Bancorp | Community West vs. First Capital | Community West vs. HomeTrust Bancshares |
| Oak Valley vs. Home Federal Bancorp | Oak Valley vs. Lake Shore Bancorp | Oak Valley vs. Community West Bancshares | Oak Valley vs. Magyar 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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