Correlation Between First Community and First Hawaiian
Can any of the company-specific risk be diversified away by investing in both First Community and First Hawaiian 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 Community and First Hawaiian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Community and First Hawaiian, you can compare the effects of market volatilities on First Community and First Hawaiian 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 Community with a short position of First Hawaiian. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and First Hawaiian.
Diversification Opportunities for First Community and First Hawaiian
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and First is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding First Community and First Hawaiian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Hawaiian and First Community 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 Community are associated (or correlated) with First Hawaiian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Hawaiian has no effect on the direction of First Community i.e., First Community and First Hawaiian go up and down completely randomly.
Pair Corralation between First Community and First Hawaiian
Given the investment horizon of 90 days First Community is expected to generate 1.67 times less return on investment than First Hawaiian. But when comparing it to its historical volatility, First Community is 1.62 times less risky than First Hawaiian. It trades about 0.25 of its potential returns per unit of risk. First Hawaiian is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 2,376 in First Hawaiian on August 25, 2024 and sell it today you would earn a total of 414.00 from holding First Hawaiian or generate 17.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Community vs. First Hawaiian
Performance |
| Timeline |
| First Community |
| First Hawaiian |
First Community and First Hawaiian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Community and First Hawaiian
The main advantage of trading using opposite First Community and First Hawaiian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community position performs unexpectedly, First Hawaiian 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 First Hawaiian will offset losses from the drop in First Hawaiian's long position.| First Community vs. Community West Bancshares | First Community vs. First Financial Northwest | First Community vs. First Northwest Bancorp | First Community vs. Home Federal Bancorp |
| First Hawaiian vs. Territorial Bancorp | First Hawaiian vs. Bank of Hawaii | First Hawaiian vs. Financial Institutions | First Hawaiian 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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