Correlation Between Community West and Franklin Financial

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

Diversification Opportunities for Community West and Franklin Financial

0.32

Correlation Coefficient

Community West  Franklin Financial

Weak diversification

The 3 months correlation between Community and Franklin is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and Franklin Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin 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 Franklin Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Financial has no effect on the direction of Community West i.e., Community West and Franklin Financial go up and down completely randomly.

Pair Corralation between Community West and Franklin Financial

Given the investment horizon of 90 days Community West Bancshares is expected to generate 1.13 times more return on investment than Franklin Financial. However, Community West is 1.13 times more volatile than Franklin Financial Services. It trades about 0.06 of its potential returns per unit of risk. Franklin Financial Services is currently generating about 0.03 per unit of risk. If you would invest  1,776  in Community West Bancshares on May 5, 2025 and sell it today you would earn a total of  97.00  from holding Community West Bancshares or generate 5.46% return on investment over 90 days.

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

Community West Bancshares  vs.  Franklin Financial Services

Community West Bancshares

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Community West Bancshares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Franklin Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Financial Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Franklin Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Community West and Franklin Financial

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

The idea behind Community West Bancshares and Franklin 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.