Correlation Between Western New and Community West
Can any of the company-specific risk be diversified away by investing in both Western New 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 Western New and Community West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western New England and Community West Bancshares, you can compare the effects of market volatilities on Western New 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 Western New with a short position of Community West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western New and Community West.
Diversification Opportunities for Western New and Community West
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and Community is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Western New England 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 Western New 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 Western New England 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 Western New i.e., Western New and Community West go up and down completely randomly.
Pair Corralation between Western New and Community West
Given the investment horizon of 90 days Western New is expected to generate 17.83 times less return on investment than Community West. But when comparing it to its historical volatility, Western New England is 5.5 times less risky than Community West. It trades about 0.02 of its potential returns per unit of risk. Community West Bancshares is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,345 in Community West Bancshares on September 3, 2024 and sell it today you would earn a total of 847.00 from holding Community West Bancshares or generate 62.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western New England vs. Community West Bancshares
Performance |
| Timeline |
| Western New England |
| Community West Bancshares |
Western New and Community West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western New and Community West
The main advantage of trading using opposite Western New and Community West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western New 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.| Western New vs. IF Bancorp | Western New vs. Shore Bancshares | Western New vs. Colony Bankcorp | Western New vs. Investar Holding Corp |
| 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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