Correlation Between Community Bancorp and Community Heritage

Can any of the company-specific risk be diversified away by investing in both Community Bancorp and Community Heritage 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 Bancorp and Community Heritage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Community Bancorp of and Community Heritage Financial, you can compare the effects of market volatilities on Community Bancorp and Community Heritage 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 Bancorp with a short position of Community Heritage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community Bancorp and Community Heritage.

Diversification Opportunities for Community Bancorp and Community Heritage

0.68

Correlation Coefficient

Community Bancorp  Community Heritage

Poor diversification

The 3 months correlation between Community and Community is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Community Bancorp of and Community Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Heritage and Community Bancorp 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 Bancorp of are associated (or correlated) with Community Heritage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Heritage has no effect on the direction of Community Bancorp i.e., Community Bancorp and Community Heritage go up and down completely randomly.

Pair Corralation between Community Bancorp and Community Heritage

Given the investment horizon of 90 days Community Bancorp of is expected to generate 2.31 times more return on investment than Community Heritage. However, Community Bancorp is 2.31 times more volatile than Community Heritage Financial. It trades about 0.16 of its potential returns per unit of risk. Community Heritage Financial is currently generating about 0.21 per unit of risk. If you would invest  1,247  in Community Bancorp of on May 10, 2025 and sell it today you would earn a total of  278.00  from holding Community Bancorp of or generate 22.29% return on investment over 90 days.

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

Community Bancorp of  vs.  Community Heritage Financial

Community Bancorp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Community Bancorp of are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Community Bancorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Community Heritage

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Community Heritage Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical indicators, Community Heritage reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Community Bancorp and Community Heritage

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

The idea behind Community Bancorp of and Community Heritage 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.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.