Correlation Between East West and Lifevantage

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

Diversification Opportunities for East West and Lifevantage

0.36

Correlation Coefficient

East West  Lifevantage

Weak diversification

The 3 months correlation between East and Lifevantage is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and Lifevantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifevantage 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 Lifevantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifevantage has no effect on the direction of East West i.e., East West and Lifevantage go up and down completely randomly.

Pair Corralation between East West and Lifevantage

Given the investment horizon of 90 days East West Bancorp is expected to under-perform the Lifevantage. But the stock apears to be less risky and, when comparing its historical volatility, East West Bancorp is 3.48 times less risky than Lifevantage. The stock trades about -0.23 of its potential returns per unit of risk. The Lifevantage is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,428  in Lifevantage on October 10, 2024 and sell it today you would earn a total of  217.00  from holding Lifevantage or generate 15.2% return on investment over 90 days.

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

East West Bancorp  vs.  Lifevantage

East West Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in East West Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, East West exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lifevantage

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lifevantage are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Lifevantage displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with East West and Lifevantage

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

The idea behind East West Bancorp and Lifevantage 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.