Correlation Between First Financial and Bank of Hawaii
Can any of the company-specific risk be diversified away by investing in both First Financial and Bank of Hawaii 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 Financial and Bank of Hawaii into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Financial Northwest and Bank of Hawaii, you can compare the effects of market volatilities on First Financial and Bank of Hawaii 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 Financial with a short position of Bank of Hawaii. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Bank of Hawaii.
Diversification Opportunities for First Financial and Bank of Hawaii
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Bank is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Northwest and Bank of Hawaii in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Hawaii and First Financial 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 Financial Northwest are associated (or correlated) with Bank of Hawaii. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Hawaii has no effect on the direction of First Financial i.e., First Financial and Bank of Hawaii go up and down completely randomly.
Pair Corralation between First Financial and Bank of Hawaii
Given the investment horizon of 90 days First Financial Northwest is expected to under-perform the Bank of Hawaii. But the stock apears to be less risky and, when comparing its historical volatility, First Financial Northwest is 2.87 times less risky than Bank of Hawaii. The stock trades about -0.04 of its potential returns per unit of risk. The Bank of Hawaii is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 6,539 in Bank of Hawaii on August 26, 2024 and sell it today you would earn a total of 1,489 from holding Bank of Hawaii or generate 22.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Northwest vs. Bank of Hawaii
Performance |
| Timeline |
| First Financial Northwest |
| Bank of Hawaii |
First Financial and Bank of Hawaii Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Bank of Hawaii
The main advantage of trading using opposite First Financial and Bank of Hawaii positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Bank of Hawaii 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 Bank of Hawaii will offset losses from the drop in Bank of Hawaii's long position.| First Financial vs. Fifth Third Bancorp | First Financial vs. Zions Bancorporation | First Financial vs. Huntington Bancshares Incorporated | First Financial vs. PNC Financial Services |
| Bank of Hawaii vs. Central Pacific Financial | Bank of Hawaii vs. Territorial Bancorp | Bank of Hawaii vs. First Bancorp | Bank of Hawaii vs. Hancock Whitney Corp |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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