Correlation Between Knife River and Community West

Can any of the company-specific risk be diversified away by investing in both Knife River and Community West 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 Knife River and Community West into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Knife River and Community West Bancshares, you can compare the effects of market volatilities on Knife River and Community West 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 Knife River with a short position of Community West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knife River and Community West.

Diversification Opportunities for Knife River and Community West

0.11

Correlation Coefficient

Knife River  Community West

Average diversification

The 3 months correlation between Knife and Community is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Community West Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community West Bancshares and Knife River 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 Knife River are associated (or correlated) with Community West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community West Bancshares has no effect on the direction of Knife River i.e., Knife River and Community West go up and down completely randomly.

Pair Corralation between Knife River and Community West

Considering the 90-day investment horizon Knife River is expected to under-perform the Community West. In addition to that, Knife River is 1.37 times more volatile than Community West Bancshares. It trades about -0.08 of its total potential returns per unit of risk. Community West Bancshares is currently generating about -0.05 per unit of volatility. If you would invest  1,750  in Community West Bancshares on March 22, 2024 and sell it today you would lose (60.00) from holding Community West Bancshares or give up 3.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

Knife River  vs.  Community West Bancshares

Knife River

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Knife River has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Community West Bancshares

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Community West Bancshares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental drivers, Community West exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knife River and Community West

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

The idea behind Knife River and Community West Bancshares 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.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.