Correlation Between Financial Institutions and Hope Bancorp
Can any of the company-specific risk be diversified away by investing in both Financial Institutions and Hope 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 Financial Institutions and Hope Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Institutions and Hope Bancorp, you can compare the effects of market volatilities on Financial Institutions and Hope 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 Financial Institutions with a short position of Hope Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Institutions and Hope Bancorp.
Diversification Opportunities for Financial Institutions and Hope Bancorp
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Financial and Hope is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Financial Institutions and Hope Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hope Bancorp and Financial Institutions 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 Financial Institutions are associated (or correlated) with Hope Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hope Bancorp has no effect on the direction of Financial Institutions i.e., Financial Institutions and Hope Bancorp go up and down completely randomly.
Pair Corralation between Financial Institutions and Hope Bancorp
Given the investment horizon of 90 days Financial Institutions is expected to generate 1.19 times more return on investment than Hope Bancorp. However, Financial Institutions is 1.19 times more volatile than Hope Bancorp. It trades about 0.15 of its potential returns per unit of risk. Hope Bancorp is currently generating about 0.11 per unit of risk. If you would invest 1,704 in Financial Institutions on August 31, 2024 and sell it today you would earn a total of 1,012 from holding Financial Institutions or generate 59.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Institutions vs. Hope Bancorp
Performance |
| Timeline |
| Financial Institutions |
| Hope Bancorp |
Financial Institutions and Hope Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Institutions and Hope Bancorp
The main advantage of trading using opposite Financial Institutions and Hope Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Institutions position performs unexpectedly, Hope 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 Hope Bancorp will offset losses from the drop in Hope Bancorp's long position.| Financial Institutions vs. First Community | Financial Institutions vs. Community West Bancshares | Financial Institutions vs. First Financial Northwest | Financial Institutions vs. First Northwest Bancorp |
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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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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