Correlation Between East West and Hanger

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

Diversification Opportunities for East West and Hanger

0.0

Correlation Coefficient

East West  Hanger

Pay attention - limited upside

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

Pair Corralation between East West and Hanger

If you would invest (100.00) in Hanger Inc on December 18, 2024 and sell it today you would earn a total of  100.00  from holding Hanger Inc or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

East West Bancorp  vs.  Hanger Inc

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.

Hanger Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hanger Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Hanger is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with East West and Hanger

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

The idea behind East West Bancorp and Hanger Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.