Correlation Between East West and Franklin Street
Can any of the company-specific risk be diversified away by investing in both East West and Franklin Street 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 Franklin Street 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 Franklin Street Properties, you can compare the effects of market volatilities on East West and Franklin Street 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 Franklin Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Franklin Street.
Diversification Opportunities for East West and Franklin Street
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between East and Franklin is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and Franklin Street Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Street Prop 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 Franklin Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Street Prop has no effect on the direction of East West i.e., East West and Franklin Street go up and down completely randomly.
Pair Corralation between East West and Franklin Street
Given the investment horizon of 90 days East West Bancorp is expected to generate 0.68 times more return on investment than Franklin Street. However, East West Bancorp is 1.47 times less risky than Franklin Street. It trades about 0.3 of its potential returns per unit of risk. Franklin Street Properties is currently generating about -0.04 per unit of risk. If you would invest 9,447 in East West Bancorp on November 3, 2024 and sell it today you would earn a total of 850.00 from holding East West Bancorp or generate 9.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
East West Bancorp vs. Franklin Street Properties
Performance |
| Timeline |
| East West Bancorp |
| Franklin Street Prop |
East West and Franklin Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and Franklin Street
The main advantage of trading using opposite East West and Franklin Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, Franklin Street 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 Franklin Street will offset losses from the drop in Franklin Street'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 |
| Franklin Street vs. Boston Properties | Franklin Street vs. Douglas Emmett | Franklin Street vs. Kilroy Realty Corp | Franklin Street vs. Alexandria Real Estate |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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