Correlation Between East West and Penns Woods
Can any of the company-specific risk be diversified away by investing in both East West and Penns Woods 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 Penns Woods 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 Penns Woods Bancorp, you can compare the effects of market volatilities on East West and Penns Woods 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 Penns Woods. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Penns Woods.
Diversification Opportunities for East West and Penns Woods
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between East and Penns is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and Penns Woods Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penns Woods 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 Penns Woods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penns Woods Bancorp has no effect on the direction of East West i.e., East West and Penns Woods go up and down completely randomly.
Pair Corralation between East West and Penns Woods
Given the investment horizon of 90 days East West Bancorp is expected to generate 0.96 times more return on investment than Penns Woods. However, East West Bancorp is 1.04 times less risky than Penns Woods. It trades about 0.11 of its potential returns per unit of risk. Penns Woods Bancorp is currently generating about 0.09 per unit of risk. If you would invest 7,002 in East West Bancorp on August 25, 2024 and sell it today you would earn a total of 4,006 from holding East West Bancorp or generate 57.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
East West Bancorp vs. Penns Woods Bancorp
Performance |
| Timeline |
| East West Bancorp |
| Penns Woods Bancorp |
East West and Penns Woods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and Penns Woods
The main advantage of trading using opposite East West and Penns Woods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, Penns Woods 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 Penns Woods will offset losses from the drop in Penns Woods' long position.| East West vs. Barclays PLC ADR | East West vs. UBS Group AG | East West vs. ING Group NV | East West vs. Citigroup |
| Penns Woods vs. 1st Source | Penns Woods vs. Great Southern Bancorp | Penns Woods vs. Waterstone Financial | Penns Woods vs. First Community |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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