Correlation Between Bank of Hawaii and US Bancorp

Can any of the company-specific risk be diversified away by investing in both Bank of Hawaii and US 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 Bank of Hawaii and US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank of Hawaii and US Bancorp, you can compare the effects of market volatilities on Bank of Hawaii and US 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 Bank of Hawaii with a short position of US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Hawaii and US Bancorp.

Diversification Opportunities for Bank of Hawaii and US Bancorp

0.46

Correlation Coefficient

Bank of Hawaii  US Bancorp

Very weak diversification

The 3 months correlation between Bank and USB-PR is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Hawaii and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and Bank of Hawaii 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 Bank of Hawaii are associated (or correlated) with US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Bank of Hawaii i.e., Bank of Hawaii and US Bancorp go up and down completely randomly.

Pair Corralation between Bank of Hawaii and US Bancorp

Assuming the 90 days trading horizon Bank of Hawaii is expected to generate 1.06 times more return on investment than US Bancorp. However, Bank of Hawaii is 1.06 times more volatile than US Bancorp. It trades about 0.1 of its potential returns per unit of risk. US Bancorp is currently generating about -0.02 per unit of risk. If you would invest  1,552  in Bank of Hawaii on December 21, 2024 and sell it today you would earn a total of  88.00  from holding Bank of Hawaii or generate 5.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bank of Hawaii  vs.  US Bancorp

Bank of Hawaii

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Hawaii are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, Bank of Hawaii is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

US Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, US Bancorp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bank of Hawaii and US Bancorp

The main advantage of trading using opposite Bank of Hawaii and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Hawaii position performs unexpectedly, US 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 US Bancorp will offset losses from the drop in US Bancorp's long position.

The idea behind Bank of Hawaii and US Bancorp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.