Correlation Between Community West and TrustCo Bank
Can any of the company-specific risk be diversified away by investing in both Community West and TrustCo 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 TrustCo 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 TrustCo Bank Corp, you can compare the effects of market volatilities on Community West and TrustCo 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 TrustCo Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and TrustCo Bank.
Diversification Opportunities for Community West and TrustCo Bank
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Community and TrustCo is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and TrustCo Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TrustCo Bank Corp 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 TrustCo Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TrustCo Bank Corp has no effect on the direction of Community West i.e., Community West and TrustCo Bank go up and down completely randomly.
Pair Corralation between Community West and TrustCo Bank
Given the investment horizon of 90 days Community West Bancshares is expected to generate 1.18 times more return on investment than TrustCo Bank. However, Community West is 1.18 times more volatile than TrustCo Bank Corp. It trades about 0.26 of its potential returns per unit of risk. TrustCo Bank Corp is currently generating about -0.02 per unit of risk. If you would invest 2,036 in Community West Bancshares on September 13, 2024 and sell it today you would earn a total of 124.00 from holding Community West Bancshares or generate 6.09% 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. TrustCo Bank Corp
Performance |
| Timeline |
| Community West Bancshares |
| TrustCo Bank Corp |
Community West and TrustCo Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community West and TrustCo Bank
The main advantage of trading using opposite Community West and TrustCo Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, TrustCo 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 TrustCo Bank will offset losses from the drop in TrustCo Bank'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 |
| TrustCo Bank vs. Southern Missouri Bancorp | TrustCo Bank vs. IF Bancorp | TrustCo Bank vs. Colony Bankcorp | TrustCo Bank vs. Old Point Financial |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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