Correlation Between East West and PXP Energy

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

Diversification Opportunities for East West and PXP Energy

0.41

Correlation Coefficient

East West  PXP Energy

Very weak diversification

The 3 months correlation between East and PXP is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding East West Banking and PXP Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PXP Energy Corp 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 PXP Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PXP Energy Corp has no effect on the direction of East West i.e., East West and PXP Energy go up and down completely randomly.

Pair Corralation between East West and PXP Energy

Assuming the 90 days trading horizon East West Banking is expected to generate 0.21 times more return on investment than PXP Energy. However, East West Banking is 4.79 times less risky than PXP Energy. It trades about 0.24 of its potential returns per unit of risk. PXP Energy Corp is currently generating about 0.03 per unit of risk. If you would invest  970.00  in East West Banking on October 24, 2024 and sell it today you would earn a total of  28.00  from holding East West Banking or generate 2.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

East West Banking  vs.  PXP Energy Corp

East West Banking

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East West Banking has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, East West is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

PXP Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PXP Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with East West and PXP Energy

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

The idea behind East West Banking and PXP Energy Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.