Correlation Between Provident Financial and Territorial Bancorp
Can any of the company-specific risk be diversified away by investing in both Provident Financial and Territorial 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 Provident Financial and Territorial Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Provident Financial Services and Territorial Bancorp, you can compare the effects of market volatilities on Provident Financial and Territorial 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 Provident Financial with a short position of Territorial Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Provident Financial and Territorial Bancorp.
Diversification Opportunities for Provident Financial and Territorial Bancorp
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Provident and Territorial is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Provident Financial Services and Territorial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Territorial Bancorp and Provident 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 Provident Financial Services are associated (or correlated) with Territorial Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Territorial Bancorp has no effect on the direction of Provident Financial i.e., Provident Financial and Territorial Bancorp go up and down completely randomly.
Pair Corralation between Provident Financial and Territorial Bancorp
Assuming the 90 days horizon Provident Financial Services is expected to generate 0.95 times more return on investment than Territorial Bancorp. However, Provident Financial Services is 1.05 times less risky than Territorial Bancorp. It trades about 0.29 of its potential returns per unit of risk. Territorial Bancorp is currently generating about 0.1 per unit of risk. If you would invest 1,660 in Provident Financial Services on September 5, 2024 and sell it today you would earn a total of 330.00 from holding Provident Financial Services or generate 19.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Provident Financial Services vs. Territorial Bancorp
Performance |
| Timeline |
| Provident Financial |
| Territorial Bancorp |
Provident Financial and Territorial Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Provident Financial and Territorial Bancorp
The main advantage of trading using opposite Provident Financial and Territorial Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Provident Financial position performs unexpectedly, Territorial 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 Territorial Bancorp will offset losses from the drop in Territorial Bancorp's long position.| Provident Financial vs. New York Community | Provident Financial vs. Northwest Bancshares | Provident Financial vs. Territorial 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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