Correlation Between East West and Credit Suisse
Can any of the company-specific risk be diversified away by investing in both East West and Credit Suisse 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 Credit Suisse 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 Credit Suisse Group, you can compare the effects of market volatilities on East West and Credit Suisse 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 Credit Suisse. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Credit Suisse.
Diversification Opportunities for East West and Credit Suisse
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between East and Credit is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and Credit Suisse Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Suisse 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 Credit Suisse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Suisse Group has no effect on the direction of East West i.e., East West and Credit Suisse go up and down completely randomly.
Pair Corralation between East West and Credit Suisse
Given the investment horizon of 90 days East West Bancorp is expected to generate 0.54 times more return on investment than Credit Suisse. However, East West Bancorp is 1.87 times less risky than Credit Suisse. It trades about 0.02 of its potential returns per unit of risk. Credit Suisse Group is currently generating about -0.11 per unit of risk. If you would invest 6,795 in East West Bancorp on January 17, 2024 and sell it today you would earn a total of 443.00 from holding East West Bancorp or generate 6.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 57.58% |
| Values | Daily Returns |
East West Bancorp vs. Credit Suisse Group
Performance |
| Timeline |
| East West Bancorp |
| Credit Suisse Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
East West and Credit Suisse Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and Credit Suisse
The main advantage of trading using opposite East West and Credit Suisse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, Credit Suisse 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 Credit Suisse will offset losses from the drop in Credit Suisse's long position.The idea behind East West Bancorp and Credit Suisse Group 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.| Credit Suisse vs. Barclays PLC ADR | Credit Suisse vs. HSBC Holdings PLC | Credit Suisse vs. ING Group NV | Credit Suisse 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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