Correlation Between Community West and HV Bancorp

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

Diversification Opportunities for Community West and HV Bancorp

0.29

Correlation Coefficient

Community West  HV Bancorp

Modest diversification

The 3 months correlation between Community and HVBC is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and HV Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HV Bancorp 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 HV Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HV Bancorp has no effect on the direction of Community West i.e., Community West and HV Bancorp go up and down completely randomly.

Pair Corralation between Community West and HV Bancorp

If you would invest  2,028  in Community West Bancshares on August 30, 2024 and sell it today you would earn a total of  168.00  from holding Community West Bancshares or generate 8.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Community West Bancshares  vs.  HV Bancorp

Community West Bancshares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Community West Bancshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental drivers, Community West may actually be approaching a critical reversion point that can send shares even higher in December 2024.

HV Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HV Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, HV Bancorp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Community West and HV Bancorp

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

The idea behind Community West Bancshares and HV 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.