Correlation Between East West and Sterling Bancorp
Can any of the company-specific risk be diversified away by investing in both East West and Sterling Bancorp 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 Sterling Bancorp 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 Sterling Bancorp, you can compare the effects of market volatilities on East West and Sterling Bancorp 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 Sterling Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Sterling Bancorp.
Diversification Opportunities for East West and Sterling Bancorp
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between East and Sterling is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and Sterling Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling 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 Sterling Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Bancorp has no effect on the direction of East West i.e., East West and Sterling Bancorp go up and down completely randomly.
Pair Corralation between East West and Sterling Bancorp
Given the investment horizon of 90 days East West Bancorp is expected to generate 1.04 times more return on investment than Sterling Bancorp. However, East West is 1.04 times more volatile than Sterling Bancorp. It trades about 0.06 of its potential returns per unit of risk. Sterling Bancorp is currently generating about -0.01 per unit of risk. If you would invest 6,188 in East West Bancorp on August 30, 2024 and sell it today you would earn a total of 4,817 from holding East West Bancorp or generate 77.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
East West Bancorp vs. Sterling Bancorp
Performance |
| Timeline |
| East West Bancorp |
| Sterling Bancorp |
East West and Sterling Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and Sterling Bancorp
The main advantage of trading using opposite East West and Sterling Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, Sterling Bancorp 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 Sterling Bancorp will offset losses from the drop in Sterling Bancorp'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 |
| Sterling Bancorp vs. Home Federal Bancorp | Sterling Bancorp vs. Lake Shore Bancorp | Sterling Bancorp vs. Magyar Bancorp | Sterling Bancorp vs. Franklin Financial Services |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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