Correlation Between East West and Univest Pennsylvania

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

Diversification Opportunities for East West and Univest Pennsylvania

0.74

Correlation Coefficient

East West  Univest Pennsylvania

Poor diversification

The 3 months correlation between East and Univest is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and Univest Pennsylvania in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Univest Pennsylvania 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 Univest Pennsylvania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Univest Pennsylvania has no effect on the direction of East West i.e., East West and Univest Pennsylvania go up and down completely randomly.

Pair Corralation between East West and Univest Pennsylvania

Given the investment horizon of 90 days East West Bancorp is expected to under-perform the Univest Pennsylvania. In addition to that, East West is 1.02 times more volatile than Univest Pennsylvania. It trades about -0.05 of its total potential returns per unit of risk. Univest Pennsylvania is currently generating about -0.01 per unit of volatility. If you would invest  2,958  in Univest Pennsylvania on December 20, 2024 and sell it today you would lose (58.00) from holding Univest Pennsylvania or give up 1.96% of portfolio value over 90 days.

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

East West Bancorp  vs.  Univest Pennsylvania

East West Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days East West Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, East West is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Univest Pennsylvania

Risk-Adjusted Performance

Very Weak

Over the last 90 days Univest Pennsylvania has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Univest Pennsylvania is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with East West and Univest Pennsylvania

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

The idea behind East West Bancorp and Univest Pennsylvania 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.