Correlation Between East West and Henderson Investment

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

By analyzing existing cross correlation between East West Bancorp and Henderson Investment Ltd, you can compare the effects of market volatilities on East West and Henderson Investment 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 Henderson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Henderson Investment.

Diversification Opportunities for East West and Henderson Investment

0.0

Correlation Coefficient

East West  Henderson Investment

Pay attention - limited upside

The 3 months correlation between East and Henderson is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and Henderson Investment Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henderson Investment 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 Bancorp are associated (or correlated) with Henderson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henderson Investment has no effect on the direction of East West i.e., East West and Henderson Investment go up and down completely randomly.

Pair Corralation between East West and Henderson Investment

If you would invest  3.50  in Henderson Investment Ltd on December 20, 2024 and sell it today you would earn a total of  0.00  from holding Henderson Investment Ltd or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

East West Bancorp  vs.  Henderson Investment Ltd

East West Bancorp

Risk-Adjusted Performance

Very Weak

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

Henderson Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Henderson Investment Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Henderson Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with East West and Henderson Investment

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

The idea behind East West Bancorp and Henderson Investment Ltd 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.