Correlation Between Citizens Financial and Community West

Can any of the company-specific risk be diversified away by investing in both Citizens 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 Citizens 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 Citizens Financial Group, and Community West Bancshares, you can compare the effects of market volatilities on Citizens 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 Citizens Financial with a short position of Community West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and Community West.

Diversification Opportunities for Citizens Financial and Community West

0.07

Correlation Coefficient

Citizens Financial  Community West

Significant diversification

The 3 months correlation between Citizens and Community is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, 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 Citizens 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 Citizens Financial Group, 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 Citizens Financial i.e., Citizens Financial and Community West go up and down completely randomly.

Pair Corralation between Citizens Financial and Community West

Assuming the 90 days trading horizon Citizens Financial Group, is expected to generate 0.57 times more return on investment than Community West. However, Citizens Financial Group, is 1.77 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 -0.2 per unit of risk. If you would invest  2,680  in Citizens Financial Group, on November 28, 2024 and sell it today you would earn a total of  19.00  from holding Citizens Financial Group, or generate 0.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Citizens Financial Group,  vs.  Community West Bancshares

Citizens Financial Group,

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group, are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Citizens Financial is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Community West Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Community West Bancshares 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 fundamental drivers remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Citizens Financial and Community West

The main advantage of trading using opposite Citizens Financial and Community West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens 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 Citizens Financial Group, 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..