Correlation Between East West and National Bank

Can any of the company-specific risk be diversified away by investing in both East West and National Bank 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 National Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between East West Insurance and National Bank of, you can compare the effects of market volatilities on East West and National Bank 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and National Bank.

Diversification Opportunities for East West and National Bank

-0.25

Correlation Coefficient

East West  National Bank

Very good diversification

The 3 months correlation between East and National is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding East West Insurance and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank 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 Insurance are associated (or correlated) with National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of East West i.e., East West and National Bank go up and down completely randomly.

Pair Corralation between East West and National Bank

Assuming the 90 days trading horizon East West Insurance is expected to generate 1.22 times more return on investment than National Bank. However, East West is 1.22 times more volatile than National Bank of. It trades about 0.31 of its potential returns per unit of risk. National Bank of is currently generating about -0.07 per unit of risk. If you would invest  3,771  in East West Insurance on September 27, 2024 and sell it today you would earn a total of  1,958  from holding East West Insurance or generate 51.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.0%
Values	Daily Returns

East West Insurance  vs.  National Bank of

East West Insurance

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in East West Insurance are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, East West sustained solid returns over the last few months and may actually be approaching a breakup point.

National Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, National Bank 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 National Bank

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

The idea behind East West Insurance and National Bank of 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.