Correlation Between Community West and Century Financial

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

Diversification Opportunities for Community West and Century Financial

0.76

Correlation Coefficient

Community West  Century Financial

Poor diversification

The 3 months correlation between Community and Century is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Century Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century 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 Century Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Financial Corp has no effect on the direction of Community West i.e., Community West and Century Financial go up and down completely randomly.

Pair Corralation between Community West and Century Financial

Given the investment horizon of 90 days Community West Bancshares is expected to generate 3.12 times more return on investment than Century Financial. However, Community West is 3.12 times more volatile than Century Financial Corp. It trades about 0.05 of its potential returns per unit of risk. Century Financial Corp is currently generating about 0.05 per unit of risk. If you would invest  1,359  in Community West Bancshares on October 4, 2024 and sell it today you would earn a total of  555.50  from holding Community West Bancshares or generate 40.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	75.81%
Values	Daily Returns

Community West Bancshares  vs.  Century Financial Corp

Community West Bancshares

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Community West Bancshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental drivers, Community West may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Century Financial Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Century Financial Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Century Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Community West and Century Financial

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

The idea behind Community West Bancshares and Century Financial Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.