Correlation Between Home Federal and Community West
Can any of the company-specific risk be diversified away by investing in both Home 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 Home 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 Home Federal Bancorp and Community West Bancshares, you can compare the effects of market volatilities on Home 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 Home Federal with a short position of Community West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and Community West.
Diversification Opportunities for Home Federal and Community West
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and Community is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal 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 Home 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 Home Federal 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 Home Federal i.e., Home Federal and Community West go up and down completely randomly.
Pair Corralation between Home Federal and Community West
Given the investment horizon of 90 days Home Federal Bancorp is expected to under-perform the Community West. In addition to that, Home Federal is 1.15 times more volatile than Community West Bancshares. It trades about -0.15 of its total potential returns per unit of risk. Community West Bancshares is currently generating about -0.14 per unit of volatility. If you would invest 1,817 in Community West Bancshares on February 6, 2024 and sell it today you would lose (77.00) from holding Community West Bancshares or give up 4.24% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 90.48% |
Values | Daily Returns |
Home Federal Bancorp vs. Community West Bancshares
Performance |
Timeline |
Home Federal Bancorp |
Community West Bancshares |
Home Federal and Community West Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Federal and Community West
The main advantage of trading using opposite Home Federal and Community West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home 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.Home Federal vs. Northfield Bancorp | Home Federal vs. FNB Inc | Home Federal vs. Mifflinburg Bancorp | Home Federal vs. Commercial National Financial |
Community West vs. Northfield Bancorp | Community West vs. FNB Inc | Community West vs. Mifflinburg Bancorp | Community West vs. Commercial National Financial |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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