Correlation Between East West and Third Coast
Can any of the company-specific risk be diversified away by investing in both East West and Third Coast 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 Third Coast 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 Third Coast Bancshares, you can compare the effects of market volatilities on East West and Third Coast 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 Third Coast. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Third Coast.
Diversification Opportunities for East West and Third Coast
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between East and Third is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and Third Coast Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Coast Bancshares 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 Third Coast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Coast Bancshares has no effect on the direction of East West i.e., East West and Third Coast go up and down completely randomly.
Pair Corralation between East West and Third Coast
Given the investment horizon of 90 days East West is expected to generate 1.27 times less return on investment than Third Coast. But when comparing it to its historical volatility, East West Bancorp is 1.11 times less risky than Third Coast. It trades about 0.14 of its potential returns per unit of risk. Third Coast Bancshares is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,698 in Third Coast Bancshares on August 25, 2024 and sell it today you would earn a total of 1,914 from holding Third Coast Bancshares or generate 112.72% 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. Third Coast Bancshares
Performance |
| Timeline |
| East West Bancorp |
| Third Coast Bancshares |
East West and Third Coast Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and Third Coast
The main advantage of trading using opposite East West and Third Coast positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, Third Coast 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 Third Coast will offset losses from the drop in Third Coast'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 |
| Third Coast vs. Byline Bancorp | Third Coast vs. Coastal Financial Corp | Third Coast vs. NBT Bancorp | Third Coast vs. Community West Bancshares |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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