Correlation Between Union Bank and East West

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

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

Diversification Opportunities for Union Bank and East West

0.48

Correlation Coefficient

Union Bank  East West

Very weak diversification

The 3 months correlation between Union and East is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Union Bank of 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 Union Bank 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 Union Bank of 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 Union Bank i.e., Union Bank and East West go up and down completely randomly.

Pair Corralation between Union Bank and East West

Assuming the 90 days trading horizon Union Bank of is expected to under-perform the East West. In addition to that, Union Bank is 1.59 times more volatile than East West Banking. It trades about -0.15 of its total potential returns per unit of risk. East West Banking is currently generating about -0.01 per unit of volatility. If you would invest  988.00  in East West Banking on September 13, 2024 and sell it today you would lose (3.00) from holding East West Banking or give up 0.3% of portfolio value over 90 days.

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

Union Bank of  vs.  East West Banking

Union Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bank of are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Union Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

East West Banking

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in East West Banking are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, East West may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Union Bank and East West

The main advantage of trading using opposite Union Bank and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Bank 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 Union Bank of 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.