Correlation Between Old Second and Community West
Can any of the company-specific risk be diversified away by investing in both Old Second 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 Old Second and Community West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Old Second Bancorp and Community West Bancshares, you can compare the effects of market volatilities on Old Second 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 Old Second with a short position of Community West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Second and Community West.
Diversification Opportunities for Old Second and Community West
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Old and Community is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Old Second 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 Old Second 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 Old Second 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 Old Second i.e., Old Second and Community West go up and down completely randomly.
Pair Corralation between Old Second and Community West
Given the investment horizon of 90 days Old Second Bancorp is expected to generate 1.04 times more return on investment than Community West. However, Old Second is 1.04 times more volatile than Community West Bancshares. It trades about 0.13 of its potential returns per unit of risk. Community West Bancshares is currently generating about 0.11 per unit of risk. If you would invest 1,377 in Old Second Bancorp on September 3, 2024 and sell it today you would earn a total of 491.00 from holding Old Second Bancorp or generate 35.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Old Second Bancorp vs. Community West Bancshares
Performance |
| Timeline |
| Old Second Bancorp |
| Community West Bancshares |
Old Second and Community West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Old Second and Community West
The main advantage of trading using opposite Old Second and Community West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Second 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.| Old Second vs. Ohio Valley Banc | Old Second vs. Peoples Bancorp | Old Second vs. OceanFirst Financial Corp | Old Second vs. QCR Holdings |
| Community West vs. JPMorgan Chase Co | Community West vs. Citigroup | Community West vs. Wells Fargo | Community West vs. Toronto Dominion Bank |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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