Correlation Between Community West and Brookline Bancorp

Can any of the company-specific risk be diversified away by investing in both Community West and Brookline Bancorp 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 Community West and Brookline Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Community West Bancshares and Brookline Bancorp, you can compare the effects of market volatilities on Community West and Brookline Bancorp 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 Community West with a short position of Brookline Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and Brookline Bancorp.

Diversification Opportunities for Community West and Brookline Bancorp

-0.46

Correlation Coefficient

Community West  Brookline Bancorp

Very good diversification

The 3 months correlation between Community and Brookline is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Brookline Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookline Bancorp and Community West 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 Community West Bancshares are associated (or correlated) with Brookline Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookline Bancorp has no effect on the direction of Community West i.e., Community West and Brookline Bancorp go up and down completely randomly.

Pair Corralation between Community West and Brookline Bancorp

Given the investment horizon of 90 days Community West Bancshares is expected to generate 1.3 times more return on investment than Brookline Bancorp. However, Community West is 1.3 times more volatile than Brookline Bancorp. It trades about 0.09 of its potential returns per unit of risk. Brookline Bancorp is currently generating about -0.02 per unit of risk. If you would invest  1,265  in Community West Bancshares on February 1, 2024 and sell it today you would earn a total of  452.00  from holding Community West Bancshares or generate 35.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Community West Bancshares  vs.  Brookline Bancorp

Community West Bancshares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Community West Bancshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental drivers, Community West exhibited solid returns over the last few months and may actually be approaching a breakup point.

Brookline Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookline Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Community West and Brookline Bancorp

The main advantage of trading using opposite Community West and Brookline Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, Brookline Bancorp 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 Brookline Bancorp will offset losses from the drop in Brookline Bancorp's long position.

The idea behind Community West Bancshares and Brookline Bancorp 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.