Correlation Between Community West and Southern States
Can any of the company-specific risk be diversified away by investing in both Community West and Southern States 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 Southern States 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 Southern States Bancshares, you can compare the effects of market volatilities on Community West and Southern States 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 Southern States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and Southern States.
Diversification Opportunities for Community West and Southern States
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Community and Southern is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Southern States Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern States Banc 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 Southern States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern States Banc has no effect on the direction of Community West i.e., Community West and Southern States go up and down completely randomly.
Pair Corralation between Community West and Southern States
Given the investment horizon of 90 days Community West is expected to generate 1.7 times less return on investment than Southern States. But when comparing it to its historical volatility, Community West Bancshares is 1.98 times less risky than Southern States. It trades about 0.18 of its potential returns per unit of risk. Southern States Bancshares is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,036 in Southern States Bancshares on August 25, 2024 and sell it today you would earn a total of 675.00 from holding Southern States Bancshares or generate 22.23% 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. Southern States Bancshares
Performance |
| Timeline |
| Community West Bancshares |
| Southern States Banc |
Community West and Southern States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and Southern States
The main advantage of trading using opposite Community West and Southern States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, Southern States 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 Southern States will offset losses from the drop in Southern States' 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 |
| Southern States vs. Home Federal Bancorp | Southern States vs. Oak Valley Bancorp | Southern States vs. Mainstreet Bank | Southern States vs. Chemung Financial Corp |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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