Correlation Between Community West and NSTS Bancorp

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

Diversification Opportunities for Community West and NSTS Bancorp

0.57

Correlation Coefficient

Community West  NSTS Bancorp

Very weak diversification

The 3 months correlation between Community and NSTS is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and NSTS Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSTS 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 NSTS Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSTS Bancorp has no effect on the direction of Community West i.e., Community West and NSTS Bancorp go up and down completely randomly.

Pair Corralation between Community West and NSTS Bancorp

Given the investment horizon of 90 days Community West is expected to generate 1.73 times less return on investment than NSTS Bancorp. In addition to that, Community West is 1.15 times more volatile than NSTS Bancorp. It trades about 0.05 of its total potential returns per unit of risk. NSTS Bancorp is currently generating about 0.1 per unit of volatility. If you would invest  965.00  in NSTS Bancorp on September 28, 2024 and sell it today you would earn a total of  210.00  from holding NSTS Bancorp or generate 21.76% return on investment over 90 days.

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

Community West Bancshares  vs.  NSTS Bancorp

Community West Bancshares

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Community West Bancshares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

NSTS Bancorp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NSTS Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, NSTS Bancorp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Community West and NSTS Bancorp

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

The idea behind Community West Bancshares and NSTS 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.