Correlation Between IShares Technology and East West

Can any of the company-specific risk be diversified away by investing in both IShares Technology 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 IShares Technology and East West into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Technology ETF and East West Bancorp, you can compare the effects of market volatilities on IShares Technology 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 IShares Technology with a short position of East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Technology and East West.

Diversification Opportunities for IShares Technology and East West

0.35

Correlation Coefficient

IShares Technology  East West

Weak diversification

The 3 months correlation between IShares and East is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding iShares Technology ETF 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 IShares Technology 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 iShares Technology ETF 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 IShares Technology i.e., IShares Technology and East West go up and down completely randomly.

Pair Corralation between IShares Technology and East West

Considering the 90-day investment horizon iShares Technology ETF is expected to under-perform the East West. But the etf apears to be less risky and, when comparing its historical volatility, iShares Technology ETF is 1.05 times less risky than East West. The etf trades about -0.11 of its potential returns per unit of risk. The East West Bancorp is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  7,801  in East West Bancorp on January 31, 2024 and sell it today you would lose (156.00) from holding East West Bancorp or give up 2.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

iShares Technology ETF  vs.  East West Bancorp

iShares Technology ETF

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Technology ETF are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

East West Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in East West Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, East West may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with IShares Technology and East West

The main advantage of trading using opposite IShares Technology and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Technology 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.

The idea behind iShares Technology ETF and East West Bancorp 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.