Correlation Between Lake Shore and East West
Can any of the company-specific risk be diversified away by investing in both Lake Shore 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 Lake Shore and East West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lake Shore Bancorp and East West Bancorp, you can compare the effects of market volatilities on Lake Shore 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 Lake Shore with a short position of East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Shore and East West.
Diversification Opportunities for Lake Shore and East West
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lake and East is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lake Shore Bancorp 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 Lake Shore 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 Lake Shore Bancorp 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 Lake Shore i.e., Lake Shore and East West go up and down completely randomly.
Pair Corralation between Lake Shore and East West
Given the investment horizon of 90 days Lake Shore is expected to generate 2.0 times less return on investment than East West. But when comparing it to its historical volatility, Lake Shore Bancorp is 1.1 times less risky than East West. It trades about 0.03 of its potential returns per unit of risk. East West Bancorp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 6,220 in East West Bancorp on September 24, 2024 and sell it today you would earn a total of 3,371 from holding East West Bancorp or generate 54.2% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.98% |
Values | Daily Returns |
Lake Shore Bancorp vs. East West Bancorp
Performance |
Timeline |
Lake Shore Bancorp |
East West Bancorp |
Lake Shore and East West Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lake Shore and East West
The main advantage of trading using opposite Lake Shore and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Shore 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.Lake Shore vs. Home Federal Bancorp | Lake Shore vs. Magyar Bancorp | Lake Shore vs. Community West Bancshares |
East West vs. Home Federal Bancorp | East West vs. First Northwest Bancorp | East West vs. HomeTrust Bancshares | East West vs. Lake Shore Bancorp |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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