Correlation Between Community West and Triumph Financial

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

Diversification Opportunities for Community West and Triumph Financial

0.15

Correlation Coefficient

Community West  Triumph Financial

Average diversification

The 3 months correlation between Community and Triumph is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Triumph Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triumph Financial 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 Triumph Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triumph Financial has no effect on the direction of Community West i.e., Community West and Triumph Financial go up and down completely randomly.

Pair Corralation between Community West and Triumph Financial

Given the investment horizon of 90 days Community West Bancshares is expected to generate 0.5 times more return on investment than Triumph Financial. However, Community West Bancshares is 2.0 times less risky than Triumph Financial. It trades about -0.18 of its potential returns per unit of risk. Triumph Financial is currently generating about -0.29 per unit of risk. If you would invest  2,169  in Community West Bancshares on December 5, 2024 and sell it today you would lose (294.00) from holding Community West Bancshares or give up 13.55% of portfolio value over 90 days.

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

Community West Bancshares  vs.  Triumph Financial

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.

Triumph Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Triumph Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Community West and Triumph Financial

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

The idea behind Community West Bancshares and Triumph Financial 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.