Correlation Between AG Mortgage and East West

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

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

Diversification Opportunities for AG Mortgage and East West

-0.28

Correlation Coefficient

AG Mortgage  East West

Very good diversification

The 3 months correlation between MITN and East is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding AG Mortgage Investment 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 AG Mortgage 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 AG Mortgage Investment 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 AG Mortgage i.e., AG Mortgage and East West go up and down completely randomly.

Pair Corralation between AG Mortgage and East West

Given the investment horizon of 90 days AG Mortgage Investment is expected to generate 0.13 times more return on investment than East West. However, AG Mortgage Investment is 7.54 times less risky than East West. It trades about 0.2 of its potential returns per unit of risk. East West Bancorp is currently generating about -0.06 per unit of risk. If you would invest  2,460  in AG Mortgage Investment on December 18, 2024 and sell it today you would earn a total of  60.00  from holding AG Mortgage Investment or generate 2.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

AG Mortgage Investment  vs.  East West Bancorp

AG Mortgage Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AG Mortgage Investment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AG Mortgage is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with AG Mortgage and East West

The main advantage of trading using opposite AG Mortgage and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AG Mortgage 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 AG Mortgage Investment and East West Bancorp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.