Correlation Between United Overseas and First Hawaiian
Can any of the company-specific risk be diversified away by investing in both United Overseas and First Hawaiian 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 United Overseas and First Hawaiian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Overseas Bank and First Hawaiian, you can compare the effects of market volatilities on United Overseas and First Hawaiian 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 United Overseas with a short position of First Hawaiian. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Overseas and First Hawaiian.
Diversification Opportunities for United Overseas and First Hawaiian
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and First is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding United Overseas Bank and First Hawaiian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Hawaiian and United Overseas 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 United Overseas Bank are associated (or correlated) with First Hawaiian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Hawaiian has no effect on the direction of United Overseas i.e., United Overseas and First Hawaiian go up and down completely randomly.
Pair Corralation between United Overseas and First Hawaiian
Assuming the 90 days horizon United Overseas is expected to generate 1.67 times less return on investment than First Hawaiian. But when comparing it to its historical volatility, United Overseas Bank is 1.6 times less risky than First Hawaiian. It trades about 0.26 of its potential returns per unit of risk. First Hawaiian is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 2,373 in First Hawaiian on August 26, 2024 and sell it today you would earn a total of 417.00 from holding First Hawaiian or generate 17.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Overseas Bank vs. First Hawaiian
Performance |
| Timeline |
| United Overseas Bank |
| First Hawaiian |
United Overseas and First Hawaiian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Overseas and First Hawaiian
The main advantage of trading using opposite United Overseas and First Hawaiian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Overseas position performs unexpectedly, First Hawaiian 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 Hawaiian will offset losses from the drop in First Hawaiian's long position.| United Overseas vs. KBC Groep NV | United Overseas vs. DBS Group Holdings | United Overseas vs. HomeStreet | United Overseas vs. Bank of Hawaii |
| First Hawaiian vs. Fifth Third Bancorp | First Hawaiian vs. Zions Bancorporation | First Hawaiian vs. Huntington Bancshares Incorporated | First Hawaiian vs. PNC Financial Services |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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