Correlation Between Community West and William Penn

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

Diversification Opportunities for Community West and William Penn

0.72

Correlation Coefficient

Community West  William Penn

Poor diversification

The 3 months correlation between Community and William is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and William Penn Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on William Penn 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 William Penn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of William Penn Bancorp has no effect on the direction of Community West i.e., Community West and William Penn go up and down completely randomly.

Pair Corralation between Community West and William Penn

Given the investment horizon of 90 days Community West Bancshares is expected to generate 6.45 times more return on investment than William Penn. However, Community West is 6.45 times more volatile than William Penn Bancorp. It trades about 0.05 of its potential returns per unit of risk. William Penn Bancorp is currently generating about 0.01 per unit of risk. If you would invest  1,350  in Community West Bancshares on September 23, 2024 and sell it today you would earn a total of  604.00  from holding Community West Bancshares or generate 44.74% 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.  William Penn Bancorp

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.

William Penn Bancorp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in William Penn Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, William Penn is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Community West and William Penn

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

The idea behind Community West Bancshares and William Penn 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.