Correlation Between Capitol Federal and Territorial Bancorp
Can any of the company-specific risk be diversified away by investing in both Capitol Federal and Territorial Bancorp 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 Capitol Federal and Territorial Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capitol Federal Financial and Territorial Bancorp, you can compare the effects of market volatilities on Capitol Federal and Territorial Bancorp 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 Capitol Federal with a short position of Territorial Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitol Federal and Territorial Bancorp.
Diversification Opportunities for Capitol Federal and Territorial Bancorp
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capitol and Territorial is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Capitol Federal Financial and Territorial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Territorial Bancorp and Capitol Federal 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 Capitol Federal Financial are associated (or correlated) with Territorial Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Territorial Bancorp has no effect on the direction of Capitol Federal i.e., Capitol Federal and Territorial Bancorp go up and down completely randomly.
Pair Corralation between Capitol Federal and Territorial Bancorp
Assuming the 90 days horizon Capitol Federal Financial is expected to generate 1.15 times more return on investment than Territorial Bancorp. However, Capitol Federal is 1.15 times more volatile than Territorial Bancorp. It trades about 0.13 of its potential returns per unit of risk. Territorial Bancorp is currently generating about 0.1 per unit of risk. If you would invest 570.00 in Capitol Federal Financial on September 5, 2024 and sell it today you would earn a total of 55.00 from holding Capitol Federal Financial or generate 9.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capitol Federal Financial vs. Territorial Bancorp
Performance |
| Timeline |
| Capitol Federal Financial |
| Territorial Bancorp |
Capitol Federal and Territorial Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capitol Federal and Territorial Bancorp
The main advantage of trading using opposite Capitol Federal and Territorial Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitol Federal position performs unexpectedly, Territorial Bancorp 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 Territorial Bancorp will offset losses from the drop in Territorial Bancorp's long position.| Capitol Federal vs. New York Community | Capitol Federal vs. Northwest Bancshares | Capitol Federal vs. Territorial Bancorp |
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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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