Correlation Between East West and Amtech Systems

Can any of the company-specific risk be diversified away by investing in both East West and Amtech Systems 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 Amtech Systems 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 Amtech Systems, you can compare the effects of market volatilities on East West and Amtech Systems 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 Amtech Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Amtech Systems.

Diversification Opportunities for East West and Amtech Systems

-0.5

Correlation Coefficient

East West  Amtech Systems

Very good diversification

The 3 months correlation between East and Amtech is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and Amtech Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amtech Systems 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 Amtech Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amtech Systems has no effect on the direction of East West i.e., East West and Amtech Systems go up and down completely randomly.

Pair Corralation between East West and Amtech Systems

Given the investment horizon of 90 days East West Bancorp is expected to generate 0.71 times more return on investment than Amtech Systems. However, East West Bancorp is 1.4 times less risky than Amtech Systems. It trades about 0.08 of its potential returns per unit of risk. Amtech Systems is currently generating about 0.01 per unit of risk. If you would invest  8,271  in East West Bancorp on September 21, 2024 and sell it today you would earn a total of  1,363  from holding East West Bancorp or generate 16.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.07%
Values	Daily Returns

East West Bancorp  vs.  Amtech Systems

East West Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in East West Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, East West exhibited solid returns over the last few months and may actually be approaching a breakup point.

Amtech Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amtech Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Amtech Systems is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with East West and Amtech Systems

The main advantage of trading using opposite East West and Amtech Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, Amtech Systems 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 Amtech Systems will offset losses from the drop in Amtech Systems' long position.

The idea behind East West Bancorp and Amtech Systems 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.