Correlation Between Community West and BDO Unibank

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

Diversification Opportunities for Community West and BDO Unibank

-0.6

Correlation Coefficient

Community West  BDO Unibank

Excellent diversification

The 3 months correlation between Community and BDO is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and BDO Unibank ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BDO Unibank ADR 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 BDO Unibank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BDO Unibank ADR has no effect on the direction of Community West i.e., Community West and BDO Unibank go up and down completely randomly.

Pair Corralation between Community West and BDO Unibank

Given the investment horizon of 90 days Community West Bancshares is expected to under-perform the BDO Unibank. But the stock apears to be less risky and, when comparing its historical volatility, Community West Bancshares is 2.01 times less risky than BDO Unibank. The stock trades about -0.03 of its potential returns per unit of risk. The BDO Unibank ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,565  in BDO Unibank ADR on December 29, 2024 and sell it today you would earn a total of  112.00  from holding BDO Unibank ADR or generate 4.37% return on investment over 90 days.

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

Community West Bancshares  vs.  BDO Unibank ADR

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 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.

BDO Unibank ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BDO Unibank ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BDO Unibank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Community West and BDO Unibank

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

The idea behind Community West Bancshares and BDO Unibank ADR 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.