Correlation Between Alerus Financial and Community West

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

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

Diversification Opportunities for Alerus Financial and Community West

0.24

Correlation Coefficient

Alerus Financial  Community West

Modest diversification

The 3 months correlation between Alerus and Community is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alerus Financial Corp 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 Alerus Financial 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 Alerus Financial Corp 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 Alerus Financial i.e., Alerus Financial and Community West go up and down completely randomly.

Pair Corralation between Alerus Financial and Community West

Given the investment horizon of 90 days Alerus Financial Corp is expected to under-perform the Community West. In addition to that, Alerus Financial is 1.55 times more volatile than Community West Bancshares. It trades about -0.1 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  1,864  in Community West Bancshares on October 22, 2024 and sell it today you would earn a total of  26.00  from holding Community West Bancshares or generate 1.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Alerus Financial Corp  vs.  Community West Bancshares

Alerus Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alerus Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Community West Bancshares

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Community West Bancshares are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Community West is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alerus Financial and Community West

The main advantage of trading using opposite Alerus Financial and Community West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alerus Financial 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 Alerus Financial Corp 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.