Correlation Between Community West and Banco De

Can any of the company-specific risk be diversified away by investing in both Community West and Banco De 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 Banco De 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 Banco De Chile, you can compare the effects of market volatilities on Community West and Banco De 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 Banco De. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and Banco De.

Diversification Opportunities for Community West and Banco De

-0.37

Correlation Coefficient

Community West  Banco De

Very good diversification

The 3 months correlation between Community and Banco is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Banco De Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco De Chile 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 Banco De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco De Chile has no effect on the direction of Community West i.e., Community West and Banco De go up and down completely randomly.

Pair Corralation between Community West and Banco De

Given the investment horizon of 90 days Community West Bancshares is expected to generate 1.3 times more return on investment than Banco De. However, Community West is 1.3 times more volatile than Banco De Chile. It trades about 0.09 of its potential returns per unit of risk. Banco De Chile is currently generating about -0.13 per unit of risk. If you would invest  2,028  in Community West Bancshares on August 30, 2024 and sell it today you would earn a total of  168.00  from holding Community West Bancshares or generate 8.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Community West Bancshares  vs.  Banco De Chile

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 may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Banco De Chile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco De Chile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Community West and Banco De

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

The idea behind Community West Bancshares and Banco De Chile 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.