Correlation Between Community West and Coastal Financial
Can any of the company-specific risk be diversified away by investing in both Community West and Coastal Financial 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 Coastal Financial 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 Coastal Financial Corp, you can compare the effects of market volatilities on Community West and Coastal Financial 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 Coastal Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and Coastal Financial.
Diversification Opportunities for Community West and Coastal Financial
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Community and Coastal is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Coastal Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coastal Financial Corp 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 Coastal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coastal Financial Corp has no effect on the direction of Community West i.e., Community West and Coastal Financial go up and down completely randomly.
Pair Corralation between Community West and Coastal Financial
Given the investment horizon of 90 days Community West is expected to generate 4.48 times less return on investment than Coastal Financial. But when comparing it to its historical volatility, Community West Bancshares is 1.56 times less risky than Coastal Financial. It trades about 0.1 of its potential returns per unit of risk. Coastal Financial Corp is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 4,919 in Coastal Financial Corp on September 12, 2024 and sell it today you would earn a total of 2,661 from holding Coastal Financial Corp or generate 54.1% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Community West Bancshares vs. Coastal Financial Corp
Performance |
Timeline |
Community West Bancshares |
Coastal Financial Corp |
Community West and Coastal Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Community West and Coastal Financial
The main advantage of trading using opposite Community West and Coastal Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, Coastal Financial 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 Coastal Financial will offset losses from the drop in Coastal Financial's long position.Community West vs. Home Federal Bancorp | Community West vs. Magyar Bancorp | Community West vs. First Northwest Bancorp | Community West vs. First Financial Northwest |
Coastal Financial vs. JPMorgan Chase Co | Coastal Financial vs. Citigroup | Coastal Financial vs. Wells Fargo | Coastal Financial vs. Toronto Dominion Bank |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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