Correlation Between East West and Tectonic Financial
Can any of the company-specific risk be diversified away by investing in both East West and Tectonic Financial 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 Tectonic Financial 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 Tectonic Financial PR, you can compare the effects of market volatilities on East West and Tectonic Financial 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 Tectonic Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Tectonic Financial.
Diversification Opportunities for East West and Tectonic Financial
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between East and Tectonic is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and Tectonic Financial PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tectonic Financial 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 Tectonic Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tectonic Financial has no effect on the direction of East West i.e., East West and Tectonic Financial go up and down completely randomly.
Pair Corralation between East West and Tectonic Financial
Given the investment horizon of 90 days East West Bancorp is expected to under-perform the Tectonic Financial. In addition to that, East West is 1.12 times more volatile than Tectonic Financial PR. It trades about -0.05 of its total potential returns per unit of risk. Tectonic Financial PR is currently generating about 0.04 per unit of volatility. If you would invest 1,021 in Tectonic Financial PR on November 18, 2024 and sell it today you would earn a total of 9.00 from holding Tectonic Financial PR or generate 0.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
East West Bancorp vs. Tectonic Financial PR
Performance |
| Timeline |
| East West Bancorp |
| Tectonic Financial |
East West and Tectonic Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and Tectonic Financial
The main advantage of trading using opposite East West and Tectonic Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, Tectonic Financial 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 Tectonic Financial will offset losses from the drop in Tectonic Financial's long position.| East West vs. Home Federal Bancorp | East West vs. Lake Shore Bancorp | East West vs. Old Point Financial | East West vs. Parke Bancorp |
| Tectonic Financial vs. First Guaranty Bancshares | Tectonic Financial vs. First Merchants | Tectonic Financial vs. Associated Banc Corp | Tectonic Financial vs. Bridgewater Bancshares Depositary |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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