Correlation Between Community West and Peoples Bancorp

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

Diversification Opportunities for Community West and Peoples Bancorp

0.77

Correlation Coefficient

Community West  Peoples Bancorp

Poor diversification

The 3 months correlation between Community and Peoples is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Peoples Bancorp of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peoples 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 Peoples Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peoples Bancorp has no effect on the direction of Community West i.e., Community West and Peoples Bancorp go up and down completely randomly.

Pair Corralation between Community West and Peoples Bancorp

Given the investment horizon of 90 days Community West Bancshares is expected to under-perform the Peoples Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Community West Bancshares is 1.44 times less risky than Peoples Bancorp. The stock trades about -0.03 of its potential returns per unit of risk. The Peoples Bancorp of is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,467  in Peoples Bancorp of on October 12, 2024 and sell it today you would earn a total of  518.00  from holding Peoples Bancorp of or generate 21.0% return on investment over 90 days.

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

Community West Bancshares  vs.  Peoples Bancorp of

Community West Bancshares

Risk-Adjusted Performance

0 of 100

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.

Peoples Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Peoples Bancorp of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, Peoples Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Community West and Peoples Bancorp

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

The idea behind Community West Bancshares and Peoples Bancorp of 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.