Correlation Between Malaga Financial and East West

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

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

Diversification Opportunities for Malaga Financial and East West

-0.32

Correlation Coefficient

Malaga Financial  East West

Very good diversification

The 3 months correlation between Malaga and East is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Malaga Financial 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 Malaga Financial 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 Malaga Financial 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 Malaga Financial i.e., Malaga Financial and East West go up and down completely randomly.

Pair Corralation between Malaga Financial and East West

Given the investment horizon of 90 days Malaga Financial is expected to under-perform the East West. But the pink sheet apears to be less risky and, when comparing its historical volatility, Malaga Financial is 1.91 times less risky than East West. The pink sheet trades about -0.39 of its potential returns per unit of risk. The East West Bancorp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  9,718  in East West Bancorp on October 26, 2024 and sell it today you would earn a total of  575.00  from holding East West Bancorp or generate 5.92% return on investment over 90 days.

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

Malaga Financial  vs.  East West Bancorp

Malaga Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Malaga Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Malaga Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

East West Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in East West Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 Malaga Financial and East West

The main advantage of trading using opposite Malaga Financial and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Malaga Financial 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 Malaga Financial 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.