Correlation Between East West and Top Frontier

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

Diversification Opportunities for East West and Top Frontier

0.0

Correlation Coefficient

East West  Top Frontier

Pay attention - limited upside

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

Pair Corralation between East West and Top Frontier

If you would invest  9,718  in East West Bancorp on October 27, 2024 and sell it today you would earn a total of  632.00  from holding East West Bancorp or generate 6.5% return on investment over 90 days.

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

East West Bancorp  vs.  Top Frontier Investment

East West Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in East West Bancorp are ranked lower than 4 (%) 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.

Top Frontier Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Top Frontier Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Top Frontier is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with East West and Top Frontier

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

The idea behind East West Bancorp and Top Frontier Investment 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.