Correlation Between Community West and Lakeland Bancorp

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

Diversification Opportunities for Community West and Lakeland Bancorp

0.0

Correlation Coefficient

Community West  Lakeland Bancorp

Pay attention - limited upside

The 3 months correlation between Community and Lakeland is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Lakeland Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakeland 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 Lakeland Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakeland Bancorp has no effect on the direction of Community West i.e., Community West and Lakeland Bancorp go up and down completely randomly.

Pair Corralation between Community West and Lakeland Bancorp

If you would invest (100.00) in Lakeland Bancorp on December 4, 2024 and sell it today you would earn a total of  100.00  from holding Lakeland Bancorp or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Community West Bancshares  vs.  Lakeland 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 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.

Lakeland Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lakeland Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Lakeland Bancorp is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Community West and Lakeland Bancorp

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

The idea behind Community West Bancshares and Lakeland 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.