Correlation Between East West and Jerash Holdings

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

Diversification Opportunities for East West and Jerash Holdings

0.5

Correlation Coefficient

East West  Jerash Holdings

Very weak diversification

The 3 months correlation between East and Jerash is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and Jerash Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jerash Holdings 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 Jerash Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jerash Holdings has no effect on the direction of East West i.e., East West and Jerash Holdings go up and down completely randomly.

Pair Corralation between East West and Jerash Holdings

Given the investment horizon of 90 days East West is expected to generate 1.65 times less return on investment than Jerash Holdings. In addition to that, East West is 1.15 times more volatile than Jerash Holdings. It trades about 0.07 of its total potential returns per unit of risk. Jerash Holdings is currently generating about 0.13 per unit of volatility. If you would invest  293.00  in Jerash Holdings on October 11, 2024 and sell it today you would earn a total of  47.00  from holding Jerash Holdings or generate 16.04% return on investment over 90 days.

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

East West Bancorp  vs.  Jerash Holdings

East West Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in East West Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, East West may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Jerash Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jerash Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Jerash Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with East West and Jerash Holdings

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

The idea behind East West Bancorp and Jerash Holdings 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.