Correlation Between Community West and Citizens Community

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

Diversification Opportunities for Community West and Citizens Community

0.75

Correlation Coefficient

Community West  Citizens Community

Poor diversification

The 3 months correlation between Community and Citizens is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Citizens Community Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Community 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 Citizens Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Community has no effect on the direction of Community West i.e., Community West and Citizens Community go up and down completely randomly.

Pair Corralation between Community West and Citizens Community

Given the investment horizon of 90 days Community West Bancshares is expected to generate 0.94 times more return on investment than Citizens Community. However, Community West Bancshares is 1.07 times less risky than Citizens Community. It trades about -0.05 of its potential returns per unit of risk. Citizens Community Bancorp is currently generating about -0.12 per unit of risk. If you would invest  1,925  in Community West Bancshares on December 30, 2024 and sell it today you would lose (85.00) from holding Community West Bancshares or give up 4.42% of portfolio value over 90 days.

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

Community West Bancshares  vs.  Citizens Community Bancorp

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.

Citizens Community

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citizens Community Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic 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 Citizens Community

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

The idea behind Community West Bancshares and Citizens Community Bancorp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.