Correlation Between East West and ERShares Entrepreneurs
Can any of the company-specific risk be diversified away by investing in both East West and ERShares Entrepreneurs 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 ERShares Entrepreneurs 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 ERShares Entrepreneurs ETF, you can compare the effects of market volatilities on East West and ERShares Entrepreneurs 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 ERShares Entrepreneurs. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and ERShares Entrepreneurs.
Diversification Opportunities for East West and ERShares Entrepreneurs
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between East and ERShares is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and ERShares Entrepreneurs ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ERShares Entrepreneurs 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 ERShares Entrepreneurs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ERShares Entrepreneurs has no effect on the direction of East West i.e., East West and ERShares Entrepreneurs go up and down completely randomly.
Pair Corralation between East West and ERShares Entrepreneurs
Given the investment horizon of 90 days East West Bancorp is expected to generate 1.28 times more return on investment than ERShares Entrepreneurs. However, East West is 1.28 times more volatile than ERShares Entrepreneurs ETF. It trades about 0.08 of its potential returns per unit of risk. ERShares Entrepreneurs ETF is currently generating about 0.09 per unit of risk. If you would invest 7,400 in East West Bancorp on October 25, 2024 and sell it today you would earn a total of 2,875 from holding East West Bancorp or generate 38.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 93.95% |
| Values | Daily Returns |
East West Bancorp vs. ERShares Entrepreneurs ETF
Performance |
| Timeline |
| East West Bancorp |
| ERShares Entrepreneurs |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
East West and ERShares Entrepreneurs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and ERShares Entrepreneurs
The main advantage of trading using opposite East West and ERShares Entrepreneurs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, ERShares Entrepreneurs 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 ERShares Entrepreneurs will offset losses from the drop in ERShares Entrepreneurs' long position.| East West vs. Barclays PLC ADR | East West vs. UBS Group AG | East West vs. ING Group NV | East West vs. Citigroup |
| ERShares Entrepreneurs vs. East West Bancorp | ERShares Entrepreneurs vs. GSI Technology | ERShares Entrepreneurs vs. Amtech Systems | ERShares Entrepreneurs vs. Entegris |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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