Correlation Between Community West and First Mid
Can any of the company-specific risk be diversified away by investing in both Community West and First Mid 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 First Mid 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 First Mid Illinois, you can compare the effects of market volatilities on Community West and First Mid 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 First Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community West and First Mid.
Diversification Opportunities for Community West and First Mid
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Community and First is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and First Mid Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Mid Illinois 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 First Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Mid Illinois has no effect on the direction of Community West i.e., Community West and First Mid go up and down completely randomly.
Pair Corralation between Community West and First Mid
Given the investment horizon of 90 days Community West Bancshares is expected to generate 2.48 times more return on investment than First Mid. However, Community West is 2.48 times more volatile than First Mid Illinois. It trades about 0.09 of its potential returns per unit of risk. First Mid Illinois is currently generating about 0.09 per unit of risk. If you would invest 1,424 in Community West Bancshares on February 23, 2024 and sell it today you would earn a total of 298.00 from holding Community West Bancshares or generate 20.93% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Community West Bancshares vs. First Mid Illinois
Performance |
Timeline |
Community West Bancshares |
First Mid Illinois |
Community West and First Mid Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Community West and First Mid
The main advantage of trading using opposite Community West and First Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West position performs unexpectedly, First Mid 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 First Mid will offset losses from the drop in First Mid's long position.Community West vs. HUMANA INC | Community West vs. Small Cap Core | Community West vs. High Yield Municipal Fund | Community West vs. Knife River |
First Mid vs. HUMANA INC | First Mid vs. Small Cap Core | First Mid vs. High Yield Municipal Fund | First Mid vs. Knife River |
Check out your portfolio center.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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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