Correlation Between Univest Pennsylvania and East West

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

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

Diversification Opportunities for Univest Pennsylvania and East West

0.74

Correlation Coefficient

Univest Pennsylvania  East West

Poor diversification

The 3 months correlation between Univest and East is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Univest Pennsylvania 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 Univest Pennsylvania 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 Univest Pennsylvania 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 Univest Pennsylvania i.e., Univest Pennsylvania and East West go up and down completely randomly.

Pair Corralation between Univest Pennsylvania and East West

Given the investment horizon of 90 days Univest Pennsylvania is expected to generate 0.98 times more return on investment than East West. However, Univest Pennsylvania is 1.02 times less risky than East West. It trades about -0.01 of its potential returns per unit of risk. East West Bancorp is currently generating about -0.05 per unit of risk. If you would invest  2,958  in Univest Pennsylvania on December 20, 2024 and sell it today you would lose (58.00) from holding Univest Pennsylvania or give up 1.96% of portfolio value over 90 days.

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

Univest Pennsylvania  vs.  East West Bancorp

Univest Pennsylvania

Risk-Adjusted Performance

Very Weak

Over the last 90 days Univest Pennsylvania has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Univest Pennsylvania is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail 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 Univest Pennsylvania and East West

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

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.