Correlation Between First Hawaiian and Summit Bancshares
Can any of the company-specific risk be diversified away by investing in both First Hawaiian and Summit Bancshares 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 Summit Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Hawaiian and Summit Bancshares, you can compare the effects of market volatilities on First Hawaiian and Summit Bancshares 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 Summit Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Hawaiian and Summit Bancshares.
Diversification Opportunities for First Hawaiian and Summit Bancshares
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Summit is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding First Hawaiian and Summit Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Bancshares 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 Summit Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Bancshares has no effect on the direction of First Hawaiian i.e., First Hawaiian and Summit Bancshares go up and down completely randomly.
Pair Corralation between First Hawaiian and Summit Bancshares
Considering the 90-day investment horizon First Hawaiian is expected to generate 1.46 times less return on investment than Summit Bancshares. But when comparing it to its historical volatility, First Hawaiian is 1.25 times less risky than Summit Bancshares. It trades about 0.03 of its potential returns per unit of risk. Summit Bancshares is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,676 in Summit Bancshares on September 3, 2024 and sell it today you would earn a total of 711.00 from holding Summit Bancshares or generate 19.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 68.89% |
| Values | Daily Returns |
First Hawaiian vs. Summit Bancshares
Performance |
| Timeline |
| First Hawaiian |
| Summit Bancshares |
First Hawaiian and Summit Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Hawaiian and Summit Bancshares
The main advantage of trading using opposite First Hawaiian and Summit Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Hawaiian position performs unexpectedly, Summit Bancshares 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 Summit Bancshares will offset losses from the drop in Summit Bancshares' long position.| First Hawaiian vs. Territorial Bancorp | First Hawaiian vs. Bank of Hawaii | First Hawaiian vs. Financial Institutions | First Hawaiian vs. Heritage Financial |
| Summit Bancshares vs. First Hawaiian | Summit Bancshares vs. Central Pacific Financial | Summit Bancshares vs. Territorial Bancorp | Summit Bancshares vs. Comerica |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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