Correlation Between First Northwest and Community West
Can any of the company-specific risk be diversified away by investing in both First Northwest 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 First Northwest and Community West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Northwest Bancorp and Community West Bancshares, you can compare the effects of market volatilities on First Northwest 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 First Northwest with a short position of Community West. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northwest and Community West.
Diversification Opportunities for First Northwest and Community West
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Community is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest 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 First Northwest 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 First Northwest 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 First Northwest i.e., First Northwest and Community West go up and down completely randomly.
Pair Corralation between First Northwest and Community West
Given the investment horizon of 90 days First Northwest Bancorp is expected to under-perform the Community West. But the stock apears to be less risky and, when comparing its historical volatility, First Northwest Bancorp is 5.3 times less risky than Community West. The stock trades about -0.01 of its potential returns per unit of risk. The Community West Bancshares is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,345 in Community West Bancshares on August 24, 2024 and sell it today you would earn a total of 776.00 from holding Community West Bancshares or generate 57.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Northwest Bancorp vs. Community West Bancshares
Performance |
| Timeline |
| First Northwest Bancorp |
| Community West Bancshares |
First Northwest and Community West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Northwest and Community West
The main advantage of trading using opposite First Northwest and Community West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Northwest 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.| First Northwest vs. Home Federal Bancorp | First Northwest vs. First Financial Northwest | First Northwest vs. First Capital | First Northwest vs. Community West Bancshares |
| Community West vs. Home Federal Bancorp | Community West vs. Magyar Bancorp | Community West vs. First Northwest Bancorp | Community West vs. First Financial Northwest |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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