Correlation Between Sound Financial and Community West
Can any of the company-specific risk be diversified away by investing in both Sound Financial 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 Sound Financial and Community West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sound Financial Bancorp and Community West Bancshares, you can compare the effects of market volatilities on Sound Financial 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 Sound Financial with a short position of Community West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sound Financial and Community West.
Diversification Opportunities for Sound Financial and Community West
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sound and Community is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sound Financial 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 Sound Financial 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 Sound Financial 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 Sound Financial i.e., Sound Financial and Community West go up and down completely randomly.
Pair Corralation between Sound Financial and Community West
Given the investment horizon of 90 days Sound Financial Bancorp is expected to under-perform the Community West. But the stock apears to be less risky and, when comparing its historical volatility, Sound Financial Bancorp is 1.57 times less risky than Community West. The stock trades about -0.2 of its potential returns per unit of risk. The Community West Bancshares is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,905 in Community West Bancshares on November 3, 2024 and sell it today you would earn a total of 44.00 from holding Community West Bancshares or generate 2.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sound Financial Bancorp vs. Community West Bancshares
Performance |
| Timeline |
| Sound Financial Bancorp |
| Community West Bancshares |
Sound Financial and Community West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sound Financial and Community West
The main advantage of trading using opposite Sound Financial and Community West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sound Financial 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.| Sound Financial vs. Finward Bancorp | Sound Financial vs. Franklin Financial Services | Sound Financial vs. Community West Bancshares | Sound Financial vs. Home Federal Bancorp |
| Community West vs. US Bancorp | Community West vs. Truist Financial Corp | Community West vs. Fifth Third Bancorp | Community West vs. KeyCorp |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |