Correlation Between East West and Allient
Can any of the company-specific risk be diversified away by investing in both East West and Allient 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 East West and Allient into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East West Bancorp and Allient, you can compare the effects of market volatilities on East West and Allient 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 East West with a short position of Allient. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Allient.
Diversification Opportunities for East West and Allient
Very weak diversification
The 3 months correlation between East and Allient is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and Allient in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allient and East West 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 East West Bancorp are associated (or correlated) with Allient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allient has no effect on the direction of East West i.e., East West and Allient go up and down completely randomly.
Pair Corralation between East West and Allient
Given the investment horizon of 90 days East West is expected to generate 1.3 times less return on investment than Allient. But when comparing it to its historical volatility, East West Bancorp is 1.88 times less risky than Allient. It trades about 0.23 of its potential returns per unit of risk. Allient is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 2,402 in Allient on October 25, 2024 and sell it today you would earn a total of 186.00 from holding Allient or generate 7.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
East West Bancorp vs. Allient
Performance |
| Timeline |
| East West Bancorp |
| Allient |
East West and Allient Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and Allient
The main advantage of trading using opposite East West and Allient positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, Allient 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 Allient will offset losses from the drop in Allient's long position.| East West vs. Barclays PLC ADR | East West vs. UBS Group AG | East West vs. ING Group NV | East West vs. Citigroup |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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