Correlation Between Community West and First Commonwealth

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

Diversification Opportunities for Community West and First Commonwealth

0.86

Correlation Coefficient

Community West  First Commonwealth

Very poor diversification

The 3 months correlation between Community and First is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and First Commonwealth Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Commonwealth 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 First Commonwealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Commonwealth has no effect on the direction of Community West i.e., Community West and First Commonwealth go up and down completely randomly.

Pair Corralation between Community West and First Commonwealth

Given the investment horizon of 90 days Community West Bancshares is expected to generate 1.15 times more return on investment than First Commonwealth. However, Community West is 1.15 times more volatile than First Commonwealth Financial. It trades about 0.09 of its potential returns per unit of risk. First Commonwealth Financial is currently generating about 0.07 per unit of risk. If you would invest  1,833  in Community West Bancshares on May 14, 2025 and sell it today you would earn a total of  171.00  from holding Community West Bancshares or generate 9.33% 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.  First Commonwealth Financial

Community West Bancshares

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Community West Bancshares are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental drivers, Community West may actually be approaching a critical reversion point that can send shares even higher in September 2025.

First Commonwealth

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Commonwealth Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, First Commonwealth may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Community West and First Commonwealth

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

The idea behind Community West Bancshares and First Commonwealth 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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.