Correlation Between Territorial Bancorp and Capitol Federal

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Can any of the company-specific risk be diversified away by investing in both Territorial Bancorp and Capitol Federal 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 Territorial Bancorp and Capitol Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Territorial Bancorp and Capitol Federal Financial, you can compare the effects of market volatilities on Territorial Bancorp and Capitol Federal 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 Territorial Bancorp with a short position of Capitol Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Territorial Bancorp and Capitol Federal.

Diversification Opportunities for Territorial Bancorp and Capitol Federal

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Territorial and Capitol is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Territorial Bancorp and Capitol Federal Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitol Federal Financial and Territorial Bancorp 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 Territorial Bancorp are associated (or correlated) with Capitol Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitol Federal Financial has no effect on the direction of Territorial Bancorp i.e., Territorial Bancorp and Capitol Federal go up and down completely randomly.

Pair Corralation between Territorial Bancorp and Capitol Federal

Assuming the 90 days horizon Territorial Bancorp is expected to under-perform the Capitol Federal. In addition to that, Territorial Bancorp is 1.29 times more volatile than Capitol Federal Financial. It trades about -0.03 of its total potential returns per unit of risk. Capitol Federal Financial is currently generating about 0.0 per unit of volatility. If you would invest  707.00  in Capitol Federal Financial on September 8, 2024 and sell it today you would lose (97.00) from holding Capitol Federal Financial or give up 13.72% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Territorial Bancorp  vs.  Capitol Federal Financial

 Performance 
       Timeline  
Territorial Bancorp 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Territorial Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Territorial Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.
Capitol Federal Financial 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Capitol Federal Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Capitol Federal reported solid returns over the last few months and may actually be approaching a breakup point.

Territorial Bancorp and Capitol Federal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Territorial Bancorp and Capitol Federal

The main advantage of trading using opposite Territorial Bancorp and Capitol Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Territorial Bancorp position performs unexpectedly, Capitol Federal 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 Capitol Federal will offset losses from the drop in Capitol Federal's long position.
The idea behind Territorial Bancorp and Capitol Federal Financial 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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