Correlation Between East West and Transcontinental

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

Diversification Opportunities for East West and Transcontinental

0.17

Correlation Coefficient

East West  Transcontinental

Average diversification

The 3 months correlation between East and Transcontinental is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and Transcontinental Realty Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental Realty 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 Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental Realty has no effect on the direction of East West i.e., East West and Transcontinental go up and down completely randomly.

Pair Corralation between East West and Transcontinental

Given the investment horizon of 90 days East West Bancorp is expected to generate 0.95 times more return on investment than Transcontinental. However, East West Bancorp is 1.05 times less risky than Transcontinental. It trades about 0.09 of its potential returns per unit of risk. Transcontinental Realty Investors is currently generating about -0.04 per unit of risk. If you would invest  7,135  in East West Bancorp on October 9, 2024 and sell it today you would earn a total of  2,421  from holding East West Bancorp or generate 33.93% return on investment over 90 days.

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

East West Bancorp  vs.  Transcontinental Realty Invest

East West Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in East West Bancorp are ranked lower than 8 (%) 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.

Transcontinental Realty

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental Realty Investors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, Transcontinental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with East West and Transcontinental

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

The idea behind East West Bancorp and Transcontinental Realty Investors 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 CEOs Directory module to screen CEOs from public companies around the world.