Correlation Between Village Super and East West

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

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

Diversification Opportunities for Village Super and East West

0.47

Correlation Coefficient

Village Super  East West

Very weak diversification

The 3 months correlation between Village and East is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Village Super Market 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 Village Super 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 Village Super Market 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 Village Super i.e., Village Super and East West go up and down completely randomly.

Pair Corralation between Village Super and East West

Assuming the 90 days horizon Village Super is expected to generate 1.53 times less return on investment than East West. In addition to that, Village Super is 1.61 times more volatile than East West Bancorp. It trades about 0.08 of its total potential returns per unit of risk. East West Bancorp is currently generating about 0.19 per unit of volatility. If you would invest  9,630  in East West Bancorp on October 24, 2024 and sell it today you would earn a total of  450.00  from holding East West Bancorp or generate 4.67% return on investment over 90 days.

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

Village Super Market  vs.  East West Bancorp

Village Super Market

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Village Super Market are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Village Super may actually be approaching a critical reversion point that can send shares even higher in February 2025.

East West Bancorp

Risk-Adjusted Performance

3 of 100

Modest

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 Village Super and East West

The main advantage of trading using opposite Village Super and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Village Super 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 Village Super Market 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.