Correlation Between Washington Federal and Community West
Can any of the company-specific risk be diversified away by investing in both Washington Federal 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 Washington Federal and Community West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Washington Federal and Community West Bancshares, you can compare the effects of market volatilities on Washington Federal 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 Washington Federal with a short position of Community West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Federal and Community West.
Diversification Opportunities for Washington Federal and Community West
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Washington and Community is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal 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 Washington Federal 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 Washington Federal 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 Washington Federal i.e., Washington Federal and Community West go up and down completely randomly.
Pair Corralation between Washington Federal and Community West
Given the investment horizon of 90 days Washington Federal is expected to under-perform the Community West. In addition to that, Washington Federal is 1.43 times more volatile than Community West Bancshares. It trades about -0.07 of its total potential returns per unit of risk. Community West Bancshares is currently generating about -0.02 per unit of volatility. If you would invest 2,013 in Community West Bancshares on November 2, 2024 and sell it today you would lose (74.00) from holding Community West Bancshares or give up 3.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Washington Federal vs. Community West Bancshares
Performance |
| Timeline |
| Washington Federal |
| Community West Bancshares |
Washington Federal and Community West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Federal and Community West
The main advantage of trading using opposite Washington Federal and Community West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Federal 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.| Washington Federal vs. Finward Bancorp | Washington Federal vs. Great Southern Bancorp | Washington Federal vs. First Mid Illinois | Washington Federal vs. Franklin Financial Services |
| Community West vs. Home Federal Bancorp | Community West vs. Magyar Bancorp | Community West vs. First Capital | Community West vs. HomeTrust Bancshares |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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