Correlation Between Community West and CF Financial

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

Diversification Opportunities for Community West and CF Financial

0.69

Correlation Coefficient

Community West  CF Financial

Poor diversification

The 3 months correlation between Community and CFFI is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and CF Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF 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 CF Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Financial has no effect on the direction of Community West i.e., Community West and CF Financial go up and down completely randomly.

Pair Corralation between Community West and CF Financial

Given the investment horizon of 90 days Community West Bancshares is expected to generate 0.81 times more return on investment than CF Financial. However, Community West Bancshares is 1.24 times less risky than CF Financial. It trades about 0.07 of its potential returns per unit of risk. CF Financial is currently generating about 0.03 per unit of risk. If you would invest  1,139  in Community West Bancshares on July 3, 2025 and sell it today you would earn a total of  930.00  from holding Community West Bancshares or generate 81.65% return on investment over 90 days.

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

Community West Bancshares  vs.  CF Financial

Community West Bancshares

Risk-Adjusted Performance

Weakest

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.

CF Financial

Risk-Adjusted Performance

Weak

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

Pair Trading with Community West and CF Financial

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

The idea behind Community West Bancshares and CF Financial 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 Stocks Directory module to find actively traded stocks across global markets.