Correlation Between RELIANCE and East West

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

Diversification Opportunities for RELIANCE and East West

0.57
  Correlation Coefficient

Very weak diversification

The 3 months correlation between RELIANCE and East is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding RELIANCE STL ALUM 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 RELIANCE 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 RELIANCE STL ALUM 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 RELIANCE i.e., RELIANCE and East West go up and down completely randomly.

Pair Corralation between RELIANCE and East West

Assuming the 90 days trading horizon RELIANCE STL ALUM is expected to under-perform the East West. In addition to that, RELIANCE is 1.52 times more volatile than East West Bancorp. It trades about -0.45 of its total potential returns per unit of risk. East West Bancorp is currently generating about -0.26 per unit of volatility. If you would invest  10,361  in East West Bancorp on October 11, 2024 and sell it today you would lose (826.00) from holding East West Bancorp or give up 7.97% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy19.05%
ValuesDaily Returns

RELIANCE STL ALUM  vs.  East West Bancorp

 Performance 
       Timeline  
RELIANCE STL ALUM 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days RELIANCE STL ALUM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for RELIANCE STL ALUM investors.
East West Bancorp 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in East West Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, East West may actually be approaching a critical reversion point that can send shares even higher in February 2025.

RELIANCE and East West Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with RELIANCE and East West

The main advantage of trading using opposite RELIANCE and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RELIANCE 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 RELIANCE STL ALUM 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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