Correlation Between CVB Financial and Community Trust

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

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

Diversification Opportunities for CVB Financial and Community Trust

0.98

Correlation Coefficient

CVB Financial  Community Trust

Almost no diversification

The 3 months correlation between CVB and Community is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding CVB Financial and Community Trust Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Trust Bancorp and CVB Financial 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 CVB Financial are associated (or correlated) with Community Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Trust Bancorp has no effect on the direction of CVB Financial i.e., CVB Financial and Community Trust go up and down completely randomly.

Pair Corralation between CVB Financial and Community Trust

Given the investment horizon of 90 days CVB Financial is expected to generate 1.34 times less return on investment than Community Trust. In addition to that, CVB Financial is 1.25 times more volatile than Community Trust Bancorp. It trades about 0.06 of its total potential returns per unit of risk. Community Trust Bancorp is currently generating about 0.1 per unit of volatility. If you would invest  3,418  in Community Trust Bancorp on September 12, 2024 and sell it today you would earn a total of  2,484  from holding Community Trust Bancorp or generate 72.67% return on investment over 90 days.

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

CVB Financial  vs.  Community Trust Bancorp

CVB Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CVB Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental drivers, CVB Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Community Trust Bancorp

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with CVB Financial and Community Trust

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

The idea behind CVB Financial and Community Trust 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.