Correlation Between Central Pacific and Territorial Bancorp
Can any of the company-specific risk be diversified away by investing in both Central Pacific 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 Central Pacific and Territorial Bancorp 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 Territorial Bancorp, you can compare the effects of market volatilities on Central Pacific 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 Central Pacific with a short position of Territorial Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Pacific and Territorial Bancorp.
Diversification Opportunities for Central Pacific and Territorial Bancorp
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Central and Territorial is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Central Pacific Financial and Territorial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Territorial Bancorp 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 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 Central Pacific i.e., Central Pacific and Territorial Bancorp go up and down completely randomly.
Pair Corralation between Central Pacific and Territorial Bancorp
Considering the 90-day investment horizon Central Pacific Financial is expected to generate 1.08 times more return on investment than Territorial Bancorp. However, Central Pacific is 1.08 times more volatile than Territorial Bancorp. It trades about 0.21 of its potential returns per unit of risk. Territorial Bancorp is currently generating about -0.09 per unit of risk. If you would invest 2,766 in Central Pacific Financial on November 6, 2024 and sell it today you would earn a total of 223.00 from holding Central Pacific Financial or generate 8.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Pacific Financial vs. Territorial Bancorp
Performance |
| Timeline |
| Central Pacific Financial |
| Territorial Bancorp |
Central Pacific and Territorial Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Pacific and Territorial Bancorp
The main advantage of trading using opposite Central Pacific and Territorial Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Pacific 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.| Central Pacific vs. Bank of Hawaii | Central Pacific vs. Territorial Bancorp | Central Pacific vs. First Bancorp | Central Pacific vs. Hancock Whitney Corp |
| Territorial Bancorp vs. First Hawaiian | Territorial Bancorp vs. Bank of Hawaii | Territorial Bancorp vs. Financial Institutions | Territorial Bancorp vs. Heritage Financial |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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