Correlation Between East West and Union Bank

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

Diversification Opportunities for East West and Union Bank

0.48

Correlation Coefficient

East West  Union Bank

Very weak diversification

The 3 months correlation between East and Union is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding East West Banking and Union Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union 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 Union Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Bank has no effect on the direction of East West i.e., East West and Union Bank go up and down completely randomly.

Pair Corralation between East West and Union Bank

Assuming the 90 days trading horizon East West Banking is expected to generate 0.63 times more return on investment than Union Bank. However, East West Banking is 1.59 times less risky than Union Bank. It trades about -0.01 of its potential returns per unit of risk. Union Bank of is currently generating about -0.15 per unit of risk. If you would invest  988.00  in East West Banking on September 13, 2024 and sell it today you would lose (3.00) from holding East West Banking or give up 0.3% of portfolio value over 90 days.

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

East West Banking  vs.  Union Bank of

East West Banking

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in East West Banking are ranked lower than 11 (%) 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 January 2025.

Union Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bank of are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Union Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with East West and Union Bank

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

The idea behind East West Banking and Union Bank of 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.