Correlation Between Figaro Coffee and East West

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

By analyzing existing cross correlation between Figaro Coffee Group and East West Banking, you can compare the effects of market volatilities on Figaro Coffee and East West 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 Figaro Coffee with a short position of East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Figaro Coffee and East West.

Diversification Opportunities for Figaro Coffee and East West

-0.68

Correlation Coefficient

Figaro Coffee  East West

Excellent diversification

The 3 months correlation between Figaro and East is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Figaro Coffee Group and East West Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Banking and Figaro Coffee 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 Figaro Coffee Group are associated (or correlated) with East West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East West Banking has no effect on the direction of Figaro Coffee i.e., Figaro Coffee and East West go up and down completely randomly.

Pair Corralation between Figaro Coffee and East West

Assuming the 90 days trading horizon Figaro Coffee Group is expected to under-perform the East West. In addition to that, Figaro Coffee is 2.37 times more volatile than East West Banking. It trades about -0.09 of its total potential returns per unit of risk. East West Banking is currently generating about 0.04 per unit of volatility. If you would invest  992.00  in East West Banking on December 30, 2024 and sell it today you would earn a total of  24.00  from holding East West Banking or generate 2.42% return on investment over 90 days.

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

Figaro Coffee Group  vs.  East West Banking

Figaro Coffee Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Figaro Coffee Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

East West Banking

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in East West Banking are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, East West is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Figaro Coffee and East West

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

The idea behind Figaro Coffee Group and East West Banking 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.