Correlation Between CVB Financial and Dime Community

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

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

Diversification Opportunities for CVB Financial and Dime Community

0.77

Correlation Coefficient

CVB Financial  Dime Community

Poor diversification

The 3 months correlation between CVB and Dime is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding CVB Financial and Dime Community Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dime Community Bancshares and CVB 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 CVB Financial are associated (or correlated) with Dime Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dime Community Bancshares has no effect on the direction of CVB Financial i.e., CVB Financial and Dime Community go up and down completely randomly.

Pair Corralation between CVB Financial and Dime Community

Given the investment horizon of 90 days CVB Financial is expected to under-perform the Dime Community. But the stock apears to be less risky and, when comparing its historical volatility, CVB Financial is 1.25 times less risky than Dime Community. The stock trades about -0.12 of its potential returns per unit of risk. The Dime Community Bancshares is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  3,117  in Dime Community Bancshares on December 19, 2024 and sell it today you would lose (296.00) from holding Dime Community Bancshares or give up 9.5% of portfolio value over 90 days.

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

CVB Financial  vs.  Dime Community Bancshares

CVB Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days CVB Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Dime Community Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dime Community Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with CVB Financial and Dime Community

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

The idea behind CVB Financial and Dime Community 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.