Correlation Between First Bancorp and Territorial Bancorp
Can any of the company-specific risk be diversified away by investing in both First Bancorp 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 First Bancorp and Territorial Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Bancorp and Territorial Bancorp, you can compare the effects of market volatilities on First Bancorp 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 First Bancorp with a short position of Territorial Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancorp and Territorial Bancorp.
Diversification Opportunities for First Bancorp and Territorial Bancorp
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and Territorial is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Territorial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Territorial Bancorp and First 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 First Bancorp 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 First Bancorp i.e., First Bancorp and Territorial Bancorp go up and down completely randomly.
Pair Corralation between First Bancorp and Territorial Bancorp
Considering the 90-day investment horizon First Bancorp is expected to generate 1.25 times more return on investment than Territorial Bancorp. However, First Bancorp is 1.25 times more volatile than Territorial Bancorp. It trades about 0.14 of its potential returns per unit of risk. Territorial Bancorp is currently generating about 0.07 per unit of risk. If you would invest 1,932 in First Bancorp on August 25, 2024 and sell it today you would earn a total of 198.00 from holding First Bancorp or generate 10.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Bancorp vs. Territorial Bancorp
Performance |
| Timeline |
| First Bancorp |
| Territorial Bancorp |
First Bancorp and Territorial Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Bancorp and Territorial Bancorp
The main advantage of trading using opposite First Bancorp and Territorial Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancorp 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.| First Bancorp vs. Franklin Financial Services | First Bancorp vs. National Bank Holdings | First Bancorp vs. Bankwell Financial Group | First Bancorp vs. Finward Bancorp |
| 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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