Correlation Between East West and Orange County
Can any of the company-specific risk be diversified away by investing in both East West and Orange County 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 Orange County 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 Orange County Bancorp, you can compare the effects of market volatilities on East West and Orange County 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 Orange County. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Orange County.
Diversification Opportunities for East West and Orange County
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between East and Orange is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and Orange County Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange County Bancorp 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 Orange County. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange County Bancorp has no effect on the direction of East West i.e., East West and Orange County go up and down completely randomly.
Pair Corralation between East West and Orange County
Given the investment horizon of 90 days East West Bancorp is expected to generate 0.73 times more return on investment than Orange County. However, East West Bancorp is 1.37 times less risky than Orange County. It trades about 0.12 of its potential returns per unit of risk. Orange County Bancorp is currently generating about -0.02 per unit of risk. If you would invest 8,234 in East West Bancorp on November 2, 2024 and sell it today you would earn a total of 2,125 from holding East West Bancorp or generate 25.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
East West Bancorp vs. Orange County Bancorp
Performance |
| Timeline |
| East West Bancorp |
| Orange County Bancorp |
East West and Orange County Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and Orange County
The main advantage of trading using opposite East West and Orange County positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, Orange County 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 Orange County will offset losses from the drop in Orange County'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 |
| Orange County vs. Southern States Bancshares | Orange County vs. US Century Bank | Orange County vs. Third Coast Bancshares | Orange County vs. Esquire Financial Holdings |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Global Correlations Find global opportunities by holding instruments from different markets |