Correlation Between Transcontinental and East West

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Can any of the company-specific risk be diversified away by investing in both Transcontinental 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 Transcontinental and East West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transcontinental Realty Investors and East West Bancorp, you can compare the effects of market volatilities on Transcontinental 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 Transcontinental with a short position of East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transcontinental and East West.

Diversification Opportunities for Transcontinental and East West

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between Transcontinental and East is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Transcontinental Realty Invest 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 Transcontinental 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 Transcontinental Realty Investors 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 Transcontinental i.e., Transcontinental and East West go up and down completely randomly.

Pair Corralation between Transcontinental and East West

Considering the 90-day investment horizon Transcontinental Realty Investors is expected to under-perform the East West. But the stock apears to be less risky and, when comparing its historical volatility, Transcontinental Realty Investors is 1.13 times less risky than East West. The stock trades about -0.03 of its potential returns per unit of risk. The East West Bancorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,435  in East West Bancorp on October 24, 2024 and sell it today you would earn a total of  2,732  from holding East West Bancorp or generate 36.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Transcontinental Realty Invest  vs.  East West Bancorp

 Performance 
       Timeline  
Transcontinental Realty 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental Realty Investors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Transcontinental is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.
East West Bancorp 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
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.

Transcontinental and East West Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Transcontinental and East West

The main advantage of trading using opposite Transcontinental and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transcontinental 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 Transcontinental Realty Investors 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.

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