Correlation Between Prosperity Bancshares and East West
Can any of the company-specific risk be diversified away by investing in both Prosperity Bancshares and East West 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 Prosperity Bancshares and East West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosperity Bancshares and East West Bancorp, you can compare the effects of market volatilities on Prosperity Bancshares and East West 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 Prosperity Bancshares with a short position of East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosperity Bancshares and East West.
Diversification Opportunities for Prosperity Bancshares and East West
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prosperity and East is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and East West Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Bancorp and Prosperity Bancshares 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 Prosperity Bancshares are associated (or correlated) with East West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East West Bancorp has no effect on the direction of Prosperity Bancshares i.e., Prosperity Bancshares and East West go up and down completely randomly.
Pair Corralation between Prosperity Bancshares and East West
Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to generate 1.0 times less return on investment than East West. But when comparing it to its historical volatility, Prosperity Bancshares is 1.18 times less risky than East West. It trades about 0.31 of its potential returns per unit of risk. East West Bancorp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 9,456 in East West Bancorp on August 26, 2024 and sell it today you would earn a total of 1,552 from holding East West Bancorp or generate 16.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prosperity Bancshares vs. East West Bancorp
Performance |
| Timeline |
| Prosperity Bancshares |
| East West Bancorp |
Prosperity Bancshares and East West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosperity Bancshares and East West
The main advantage of trading using opposite Prosperity Bancshares and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosperity Bancshares position performs unexpectedly, East West 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 East West will offset losses from the drop in East West's long position.| Prosperity Bancshares vs. Fifth Third Bancorp | Prosperity Bancshares vs. Zions Bancorporation | Prosperity Bancshares vs. Huntington Bancshares Incorporated | Prosperity Bancshares vs. PNC Financial Services |
| East West vs. Barclays PLC ADR | East West vs. UBS Group AG | East West vs. ING Group NV | East West vs. Citigroup |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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