Correlation Between Farmers Merchants and Community West
Can any of the company-specific risk be diversified away by investing in both Farmers Merchants and Community West 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 Farmers Merchants and Community West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farmers Merchants Bancorp and Community West Bancshares, you can compare the effects of market volatilities on Farmers Merchants and Community West 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 Farmers Merchants with a short position of Community West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers Merchants and Community West.
Diversification Opportunities for Farmers Merchants and Community West
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Farmers and Community is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and Community West Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community West Bancshares and Farmers Merchants 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 Farmers Merchants Bancorp are associated (or correlated) with Community West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community West Bancshares has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and Community West go up and down completely randomly.
Pair Corralation between Farmers Merchants and Community West
Given the investment horizon of 90 days Farmers Merchants Bancorp is expected to under-perform the Community West. In addition to that, Farmers Merchants is 1.63 times more volatile than Community West Bancshares. It trades about -0.22 of its total potential returns per unit of risk. Community West Bancshares is currently generating about -0.14 per unit of volatility. If you would invest 1,929 in Community West Bancshares on November 28, 2024 and sell it today you would lose (64.00) from holding Community West Bancshares or give up 3.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farmers Merchants Bancorp vs. Community West Bancshares
Performance |
| Timeline |
| Farmers Merchants Bancorp |
| Community West Bancshares |
Farmers Merchants and Community West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmers Merchants and Community West
The main advantage of trading using opposite Farmers Merchants and Community West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers Merchants position performs unexpectedly, Community West 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 Community West will offset losses from the drop in Community West's long position.| Farmers Merchants vs. Home Federal Bancorp | Farmers Merchants vs. First Financial Northwest | Farmers Merchants vs. First Northwest Bancorp | Farmers Merchants vs. First Capital |
| Community West vs. Home Federal Bancorp | Community West vs. First Financial Northwest | Community West vs. First Northwest Bancorp | Community West 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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