Correlation Between East West and United Homes
Can any of the company-specific risk be diversified away by investing in both East West and United Homes 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 Homes 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 Homes Group, you can compare the effects of market volatilities on East West and United Homes 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 Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and United Homes.
Diversification Opportunities for East West and United Homes
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between East and United is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and United Homes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Homes Group 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 Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Homes Group has no effect on the direction of East West i.e., East West and United Homes go up and down completely randomly.
Pair Corralation between East West and United Homes
Given the investment horizon of 90 days East West Bancorp is expected to generate 0.38 times more return on investment than United Homes. However, East West Bancorp is 2.64 times less risky than United Homes. It trades about 0.3 of its potential returns per unit of risk. United Homes Group is currently generating about 0.02 per unit of risk. If you would invest 9,447 in East West Bancorp on November 3, 2024 and sell it today you would earn a total of 850.00 from holding East West Bancorp or generate 9.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
East West Bancorp vs. United Homes Group
Performance |
| Timeline |
| East West Bancorp |
| United Homes Group |
East West and United Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and United Homes
The main advantage of trading using opposite East West and United Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, United Homes 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 Homes will offset losses from the drop in United Homes' 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 Homes vs. Village Super Market | United Homes vs. Planet Fitness | United Homes vs. Bridgford Foods | United Homes vs. Playtika Holding Corp |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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