Correlation Between Community West and Summit Bancshares
Can any of the company-specific risk be diversified away by investing in both Community West and Summit Bancshares 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 Summit Bancshares 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 Summit Bancshares, you can compare the effects of market volatilities on Community West and Summit Bancshares 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 Summit Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and Summit Bancshares.
Diversification Opportunities for Community West and Summit Bancshares
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Community and Summit is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Summit Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Bancshares 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 Summit Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Bancshares has no effect on the direction of Community West i.e., Community West and Summit Bancshares go up and down completely randomly.
Pair Corralation between Community West and Summit Bancshares
Given the investment horizon of 90 days Community West Bancshares is expected to generate 1.52 times more return on investment than Summit Bancshares. However, Community West is 1.52 times more volatile than Summit Bancshares. It trades about 0.42 of its potential returns per unit of risk. Summit Bancshares is currently generating about 0.07 per unit of risk. If you would invest 1,863 in Community West Bancshares on September 1, 2024 and sell it today you would earn a total of 329.00 from holding Community West Bancshares or generate 17.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Community West Bancshares vs. Summit Bancshares
Performance |
| Timeline |
| Community West Bancshares |
| Summit Bancshares |
Community West and Summit Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and Summit Bancshares
The main advantage of trading using opposite Community West and Summit Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, Summit Bancshares 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 Summit Bancshares will offset losses from the drop in Summit Bancshares' 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 |
| Summit Bancshares vs. Bank Mandiri Persero | Summit Bancshares vs. Piraeus Bank SA | Summit Bancshares vs. Kasikornbank Public Co | Summit Bancshares vs. Turkiye Garanti Bankasi |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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