Correlation Between Central Pacific and Financial Institutions
Can any of the company-specific risk be diversified away by investing in both Central Pacific and Financial Institutions 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 Central Pacific and Financial Institutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Pacific Financial and Financial Institutions, you can compare the effects of market volatilities on Central Pacific and Financial Institutions 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 Central Pacific with a short position of Financial Institutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Pacific and Financial Institutions.
Diversification Opportunities for Central Pacific and Financial Institutions
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Central and Financial is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Central Pacific Financial and Financial Institutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Institutions and Central Pacific 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 Central Pacific Financial are associated (or correlated) with Financial Institutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Institutions has no effect on the direction of Central Pacific i.e., Central Pacific and Financial Institutions go up and down completely randomly.
Pair Corralation between Central Pacific and Financial Institutions
Considering the 90-day investment horizon Central Pacific Financial is expected to generate 0.82 times more return on investment than Financial Institutions. However, Central Pacific Financial is 1.22 times less risky than Financial Institutions. It trades about 0.12 of its potential returns per unit of risk. Financial Institutions is currently generating about 0.07 per unit of risk. If you would invest 1,898 in Central Pacific Financial on August 25, 2024 and sell it today you would earn a total of 1,319 from holding Central Pacific Financial or generate 69.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Pacific Financial vs. Financial Institutions
Performance |
| Timeline |
| Central Pacific Financial |
| Financial Institutions |
Central Pacific and Financial Institutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Pacific and Financial Institutions
The main advantage of trading using opposite Central Pacific and Financial Institutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Pacific position performs unexpectedly, Financial Institutions 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 Financial Institutions will offset losses from the drop in Financial Institutions' long position.| Central Pacific vs. Bank of Hawaii | Central Pacific vs. Territorial Bancorp | Central Pacific vs. First Bancorp | Central Pacific vs. Hancock Whitney Corp |
| Financial Institutions vs. First Community | Financial Institutions vs. Community West Bancshares | Financial Institutions vs. First Financial Northwest | Financial Institutions vs. First Northwest 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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