Correlation Between East West and Asia United

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

By analyzing existing cross correlation between East West Banking and Asia United Bank, you can compare the effects of market volatilities on East West and Asia United 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 East West with a short position of Asia United. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Asia United.

Diversification Opportunities for East West and Asia United

0.83

Correlation Coefficient

East West  Asia United

Very poor diversification

The 3 months correlation between East and Asia is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding East West Banking and Asia United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia United Bank and East 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 East West Banking are associated (or correlated) with Asia United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia United Bank has no effect on the direction of East West i.e., East West and Asia United go up and down completely randomly.

Pair Corralation between East West and Asia United

Assuming the 90 days trading horizon East West Banking is expected to under-perform the Asia United. But the stock apears to be less risky and, when comparing its historical volatility, East West Banking is 1.53 times less risky than Asia United. The stock trades about -0.25 of its potential returns per unit of risk. The Asia United Bank is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  5,900  in Asia United Bank on August 31, 2024 and sell it today you would earn a total of  400.00  from holding Asia United Bank or generate 6.78% return on investment over 90 days.

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

East West Banking  vs.  Asia United Bank

East West Banking

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in East West Banking are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, East West may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Asia United Bank

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Asia United Bank are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Asia United exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with East West and Asia United

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

The idea behind East West Banking and Asia United Bank 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.