Correlation Between United Bankshares and Community West

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Can any of the company-specific risk be diversified away by investing in both United Bankshares 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 United Bankshares and Community West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Bankshares and Community West Bancshares, you can compare the effects of market volatilities on United Bankshares 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 United Bankshares with a short position of Community West. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Bankshares and Community West.

Diversification Opportunities for United Bankshares and Community West

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between United and Community is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding United Bankshares 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 United Bankshares 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 United Bankshares 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 United Bankshares i.e., United Bankshares and Community West go up and down completely randomly.

Pair Corralation between United Bankshares and Community West

Given the investment horizon of 90 days United Bankshares is expected to generate 1.27 times less return on investment than Community West. In addition to that, United Bankshares is 1.7 times more volatile than Community West Bancshares. It trades about 0.19 of its total potential returns per unit of risk. Community West Bancshares is currently generating about 0.42 per unit of volatility. If you would invest  1,861  in Community West Bancshares on August 27, 2024 and sell it today you would earn a total of  321.00  from holding Community West Bancshares or generate 17.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

United Bankshares  vs.  Community West Bancshares

 Performance 
       Timeline  
United Bankshares 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in United Bankshares are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, United Bankshares demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Community West Bancshares 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Community West Bancshares are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental drivers, Community West may actually be approaching a critical reversion point that can send shares even higher in December 2024.

United Bankshares and Community West Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United Bankshares and Community West

The main advantage of trading using opposite United Bankshares and Community West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Bankshares 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.
The idea behind United Bankshares and Community West Bancshares pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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