Correlation Between Central Pacific and Traditions Bank
Can any of the company-specific risk be diversified away by investing in both Central Pacific and Traditions Bank 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 Traditions Bank 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 Traditions Bank, you can compare the effects of market volatilities on Central Pacific and Traditions Bank 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 Traditions Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Pacific and Traditions Bank.
Diversification Opportunities for Central Pacific and Traditions Bank
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Central and Traditions is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Central Pacific Financial and Traditions Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traditions Bank 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 Traditions Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traditions Bank has no effect on the direction of Central Pacific i.e., Central Pacific and Traditions Bank go up and down completely randomly.
Pair Corralation between Central Pacific and Traditions Bank
Considering the 90-day investment horizon Central Pacific is expected to generate 1.49 times less return on investment than Traditions Bank. But when comparing it to its historical volatility, Central Pacific Financial is 1.18 times less risky than Traditions Bank. It trades about 0.24 of its potential returns per unit of risk. Traditions Bank is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,768 in Traditions Bank on September 4, 2024 and sell it today you would earn a total of 731.00 from holding Traditions Bank or generate 26.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Central Pacific Financial vs. Traditions Bank
Performance |
| Timeline |
| Central Pacific Financial |
| Traditions Bank |
Central Pacific and Traditions Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Pacific and Traditions Bank
The main advantage of trading using opposite Central Pacific and Traditions Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Pacific position performs unexpectedly, Traditions Bank 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 Traditions Bank will offset losses from the drop in Traditions Bank'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 |
| Traditions Bank vs. Franklin Financial Services | Traditions Bank vs. ENB Financial Corp | Traditions Bank vs. Community Heritage Financial | Traditions Bank vs. Potomac Bancshares |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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