Correlation Between East West and United Security
Can any of the company-specific risk be diversified away by investing in both East West and United Security 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 United Security 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 United Security Bancshares, you can compare the effects of market volatilities on East West and United Security 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 United Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and United Security.
Diversification Opportunities for East West and United Security
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between East and United is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and United Security Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Security Banc 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 United Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Security Banc has no effect on the direction of East West i.e., East West and United Security go up and down completely randomly.
Pair Corralation between East West and United Security
Given the investment horizon of 90 days East West Bancorp is expected to generate 1.38 times more return on investment than United Security. However, East West is 1.38 times more volatile than United Security Bancshares. It trades about 0.06 of its potential returns per unit of risk. United Security Bancshares is currently generating about 0.06 per unit of risk. If you would invest 6,199 in East West Bancorp on August 28, 2024 and sell it today you would earn a total of 4,924 from holding East West Bancorp or generate 79.43% 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. United Security Bancshares
Performance |
| Timeline |
| East West Bancorp |
| United Security Banc |
East West and United Security Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and United Security
The main advantage of trading using opposite East West and United Security positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, United Security 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 United Security will offset losses from the drop in United Security'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 |
| United Security vs. Home Federal Bancorp | United Security vs. Lake Shore Bancorp | United Security vs. Community West Bancshares | United Security vs. First Northwest Bancorp |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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