Correlation Between East West and 98379JAA3

Can any of the company-specific risk be diversified away by investing in both East West and 98379JAA3 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 98379JAA3 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 RXO 75 15 NOV 27, you can compare the effects of market volatilities on East West and 98379JAA3 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 98379JAA3. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and 98379JAA3.

Diversification Opportunities for East West and 98379JAA3

0.22

Correlation Coefficient

East West  98379JAA3

Modest diversification

The 3 months correlation between East and 98379JAA3 is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and RXO 75 15 NOV 27 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RXO 75 15 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 98379JAA3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RXO 75 15 has no effect on the direction of East West i.e., East West and 98379JAA3 go up and down completely randomly.

Pair Corralation between East West and 98379JAA3

Given the investment horizon of 90 days East West Bancorp is expected to generate 7.28 times more return on investment than 98379JAA3. However, East West is 7.28 times more volatile than RXO 75 15 NOV 27. It trades about 0.1 of its potential returns per unit of risk. RXO 75 15 NOV 27 is currently generating about 0.06 per unit of risk. If you would invest  8,463  in East West Bancorp on October 10, 2024 and sell it today you would earn a total of  1,093  from holding East West Bancorp or generate 12.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	70.49%
Values	Daily Returns

East West Bancorp  vs.  RXO 75 15 NOV 27

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.

RXO 75 15

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RXO 75 15 NOV 27 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 98379JAA3 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with East West and 98379JAA3

The main advantage of trading using opposite East West and 98379JAA3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, 98379JAA3 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 98379JAA3 will offset losses from the drop in 98379JAA3's long position.

The idea behind East West Bancorp and RXO 75 15 NOV 27 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.