Correlation Between National Bank and Community West
Can any of the company-specific risk be diversified away by investing in both National Bank 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 National Bank and Community West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bank Holdings and Community West Bancshares, you can compare the effects of market volatilities on National Bank 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 National Bank with a short position of Community West. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Community West.
Diversification Opportunities for National Bank and Community West
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between National and Community is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings 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 National Bank 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 National Bank Holdings 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 National Bank i.e., National Bank and Community West go up and down completely randomly.
Pair Corralation between National Bank and Community West
Given the investment horizon of 90 days National Bank is expected to generate 1.89 times less return on investment than Community West. In addition to that, National Bank is 1.87 times more volatile than Community West Bancshares. It trades about 0.1 of its total potential returns per unit of risk. Community West Bancshares is currently generating about 0.35 per unit of volatility. If you would invest 1,859 in Community West Bancshares on August 24, 2024 and sell it today you would earn a total of 262.00 from holding Community West Bancshares or generate 14.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
National Bank Holdings vs. Community West Bancshares
Performance |
| Timeline |
| National Bank Holdings |
| Community West Bancshares |
National Bank and Community West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Community West
The main advantage of trading using opposite National Bank and Community West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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.| National Bank vs. First Community | National Bank vs. Community West Bancshares | National Bank vs. First Financial Northwest | National Bank vs. First Northwest Bancorp |
| 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 Stocks Directory module to find actively traded stocks across global markets.
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