Correlation Between HomeTrust Bancshares and East West
Can any of the company-specific risk be diversified away by investing in both HomeTrust Bancshares 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 HomeTrust Bancshares and East West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HomeTrust Bancshares and East West Bancorp, you can compare the effects of market volatilities on HomeTrust Bancshares 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 HomeTrust Bancshares with a short position of East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of HomeTrust Bancshares and East West.
Diversification Opportunities for HomeTrust Bancshares and East West
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HomeTrust and East is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding HomeTrust Bancshares and East West Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Bancorp and HomeTrust Bancshares 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 HomeTrust Bancshares 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 Bancorp has no effect on the direction of HomeTrust Bancshares i.e., HomeTrust Bancshares and East West go up and down completely randomly.
Pair Corralation between HomeTrust Bancshares and East West
Given the investment horizon of 90 days HomeTrust Bancshares is expected to generate 1.15 times less return on investment than East West. But when comparing it to its historical volatility, HomeTrust Bancshares is 1.13 times less risky than East West. It trades about 0.05 of its potential returns per unit of risk. East West Bancorp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 6,220 in East West Bancorp on September 23, 2024 and sell it today you would earn a total of 3,371 from holding East West Bancorp or generate 54.2% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
HomeTrust Bancshares vs. East West Bancorp
Performance |
Timeline |
HomeTrust Bancshares |
East West Bancorp |
HomeTrust Bancshares and East West Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HomeTrust Bancshares and East West
The main advantage of trading using opposite HomeTrust Bancshares and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HomeTrust Bancshares 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.HomeTrust Bancshares vs. First Northwest Bancorp | HomeTrust Bancshares vs. Community West Bancshares | HomeTrust Bancshares vs. First Financial Northwest | HomeTrust Bancshares vs. Great Southern Bancorp |
East West vs. Home Federal Bancorp | East West vs. First Northwest Bancorp | East West vs. Community West Bancshares | East West vs. HomeTrust Bancshares |
Check out your portfolio center.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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