Correlation Between Community West and CrossFirst Bankshares

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

Diversification Opportunities for Community West and CrossFirst Bankshares

0.65

Correlation Coefficient

Community West  CrossFirst Bankshares

Poor diversification

The 3 months correlation between Community and CrossFirst is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and CrossFirst Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CrossFirst Bankshares 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 CrossFirst Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CrossFirst Bankshares has no effect on the direction of Community West i.e., Community West and CrossFirst Bankshares go up and down completely randomly.

Pair Corralation between Community West and CrossFirst Bankshares

Given the investment horizon of 90 days Community West Bancshares is expected to under-perform the CrossFirst Bankshares. In addition to that, Community West is 26.71 times more volatile than CrossFirst Bankshares. It trades about -0.02 of its total potential returns per unit of risk. CrossFirst Bankshares is currently generating about 0.58 per unit of volatility. If you would invest  1,597  in CrossFirst Bankshares on February 27, 2025 and sell it today you would earn a total of  2.00  from holding CrossFirst Bankshares or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.84%
Values	Daily Returns

Community West Bancshares  vs.  CrossFirst Bankshares

Community West Bancshares

Risk-Adjusted Performance

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.

CrossFirst Bankshares

Risk-Adjusted Performance

Excellent

Over the last 90 days CrossFirst Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, CrossFirst Bankshares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Community West and CrossFirst Bankshares

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

The idea behind Community West Bancshares and CrossFirst Bankshares 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.