Correlation Between Community West and FVCBankcorp

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

Diversification Opportunities for Community West and FVCBankcorp

0.92

Correlation Coefficient

Community West  FVCBankcorp

Almost no diversification

The 3 months correlation between Community and FVCBankcorp is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and FVCBankcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FVCBankcorp 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 FVCBankcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FVCBankcorp has no effect on the direction of Community West i.e., Community West and FVCBankcorp go up and down completely randomly.

Pair Corralation between Community West and FVCBankcorp

Given the investment horizon of 90 days Community West Bancshares is expected to generate 0.41 times more return on investment than FVCBankcorp. However, Community West Bancshares is 2.42 times less risky than FVCBankcorp. It trades about -0.16 of its potential returns per unit of risk. FVCBankcorp is currently generating about -0.07 per unit of risk. If you would invest  2,194  in Community West Bancshares on December 1, 2024 and sell it today you would lose (265.00) from holding Community West Bancshares or give up 12.08% of portfolio value over 90 days.

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

Community West Bancshares  vs.  FVCBankcorp

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 conflicting performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

FVCBankcorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FVCBankcorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Community West and FVCBankcorp

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

The idea behind Community West Bancshares and FVCBankcorp 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.