Correlation Between Community West and Eagle Financial

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

Diversification Opportunities for Community West and Eagle Financial

0.24

Correlation Coefficient

Community West  Eagle Financial

Modest diversification

The 3 months correlation between Community and Eagle is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Eagle Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Financial Services 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 Eagle Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Financial Services has no effect on the direction of Community West i.e., Community West and Eagle Financial go up and down completely randomly.

Pair Corralation between Community West and Eagle Financial

Given the investment horizon of 90 days Community West Bancshares is expected to generate 1.7 times more return on investment than Eagle Financial. However, Community West is 1.7 times more volatile than Eagle Financial Services. It trades about -0.03 of its potential returns per unit of risk. Eagle Financial Services is currently generating about -0.25 per unit of risk. If you would invest  1,925  in Community West Bancshares on December 29, 2024 and sell it today you would lose (56.00) from holding Community West Bancshares or give up 2.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	78.69%
Values	Daily Returns

Community West Bancshares  vs.  Eagle Financial Services

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.

Eagle Financial Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eagle Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting 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 Eagle Financial

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

The idea behind Community West Bancshares and Eagle Financial Services 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.