Correlation Between First Hawaiian and First Bancorp
Can any of the company-specific risk be diversified away by investing in both First Hawaiian and First 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 Hawaiian and First Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Hawaiian and First Bancorp, you can compare the effects of market volatilities on First Hawaiian and First 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 Hawaiian with a short position of First Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Hawaiian and First Bancorp.
Diversification Opportunities for First Hawaiian and First Bancorp
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and First is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding First Hawaiian and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp and First Hawaiian 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 Hawaiian are associated (or correlated) with First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of First Hawaiian i.e., First Hawaiian and First Bancorp go up and down completely randomly.
Pair Corralation between First Hawaiian and First Bancorp
Considering the 90-day investment horizon First Hawaiian is expected to generate 0.8 times more return on investment than First Bancorp. However, First Hawaiian is 1.25 times less risky than First Bancorp. It trades about 0.26 of its potential returns per unit of risk. First Bancorp is currently generating about 0.14 per unit of risk. 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 Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Hawaiian vs. First Bancorp
Performance |
| Timeline |
| First Hawaiian |
| First Bancorp |
First Hawaiian and First Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Hawaiian and First Bancorp
The main advantage of trading using opposite First Hawaiian and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Hawaiian position performs unexpectedly, First 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 First Bancorp will offset losses from the drop in First Bancorp's long position.| First Hawaiian vs. Territorial Bancorp | First Hawaiian vs. Bank of Hawaii | First Hawaiian vs. Financial Institutions | First Hawaiian vs. Heritage Financial |
| First Bancorp vs. Franklin Financial Services | First Bancorp vs. National Bank Holdings | First Bancorp vs. Bankwell Financial Group | First Bancorp vs. Finward Bancorp |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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