Correlation Between East West and FB Financial

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

Diversification Opportunities for East West and FB Financial

0.97

Correlation Coefficient

East West  FB Financial

Almost no diversification

The 3 months correlation between East and FBK is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding East West Bancorp and FB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FB Financial Corp 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 FB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FB Financial Corp has no effect on the direction of East West i.e., East West and FB Financial go up and down completely randomly.

Pair Corralation between East West and FB Financial

Given the investment horizon of 90 days East West Bancorp is expected to under-perform the FB Financial. In addition to that, East West is 1.16 times more volatile than FB Financial Corp. It trades about -0.16 of its total potential returns per unit of risk. FB Financial Corp is currently generating about -0.16 per unit of volatility. If you would invest  5,105  in FB Financial Corp on January 5, 2025 and sell it today you would lose (1,029) from holding FB Financial Corp or give up 20.16% of portfolio value over 90 days.

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

East West Bancorp  vs.  FB Financial Corp

East West Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days East West Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

FB Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FB Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with East West and FB Financial

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

The idea behind East West Bancorp and FB Financial Corp 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 CEOs Directory module to screen CEOs from public companies around the world.