Correlation Between Community West and Citizens Financial

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

Diversification Opportunities for Community West and Citizens Financial

0.81

Correlation Coefficient

Community West  Citizens Financial

Very poor diversification

The 3 months correlation between Community and Citizens is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Citizens Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens 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 Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial has no effect on the direction of Community West i.e., Community West and Citizens Financial go up and down completely randomly.

Pair Corralation between Community West and Citizens Financial

Given the investment horizon of 90 days Community West Bancshares is expected to generate 0.67 times more return on investment than Citizens Financial. However, Community West Bancshares is 1.5 times less risky than Citizens Financial. It trades about 0.22 of its potential returns per unit of risk. Citizens Financial Services is currently generating about 0.0 per unit of risk. If you would invest  2,046  in Community West Bancshares on September 15, 2024 and sell it today you would earn a total of  104.00  from holding Community West Bancshares or generate 5.08% return on investment over 90 days.

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

Community West Bancshares  vs.  Citizens Financial Services

Community West Bancshares

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Community West Bancshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, Community West may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Citizens Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, Citizens Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Community West and Citizens Financial

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

The idea behind Community West Bancshares and Citizens Financial Services 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.