Correlation Between East West and Barclays PLC
Can any of the company-specific risk be diversified away by investing in both East West and Barclays PLC 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 Barclays PLC 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 Barclays PLC ADR, you can compare the effects of market volatilities on East West and Barclays PLC 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 Barclays PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Barclays PLC.
Diversification Opportunities for East West and Barclays PLC
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between East and Barclays is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and Barclays PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays PLC ADR 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 Barclays PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays PLC ADR has no effect on the direction of East West i.e., East West and Barclays PLC go up and down completely randomly.
Pair Corralation between East West and Barclays PLC
Given the investment horizon of 90 days East West is expected to generate 1.87 times less return on investment than Barclays PLC. In addition to that, East West is 1.28 times more volatile than Barclays PLC ADR. It trades about 0.02 of its total potential returns per unit of risk. Barclays PLC ADR is currently generating about 0.04 per unit of volatility. If you would invest 805.00 in Barclays PLC ADR on January 25, 2024 and sell it today you would earn a total of 165.00 from holding Barclays PLC ADR or generate 20.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
East West Bancorp vs. Barclays PLC ADR
Performance |
| Timeline |
| East West Bancorp |
| Barclays PLC ADR |
East West and Barclays PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and Barclays PLC
The main advantage of trading using opposite East West and Barclays PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, Barclays PLC 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 Barclays PLC will offset losses from the drop in Barclays PLC's long position.The idea behind East West Bancorp and Barclays PLC ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Barclays PLC vs. Banco Bilbao Viscaya | Barclays PLC vs. Banco Santander SA | Barclays PLC vs. UBS Group AG | Barclays PLC vs. HSBC Holdings PLC |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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