Correlation Between Bank of Hawaii and TFS Financial

Can any of the company-specific risk be diversified away by investing in both Bank of Hawaii and TFS Financial 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 TFS Financial 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 TFS Financial, you can compare the effects of market volatilities on Bank of Hawaii and TFS Financial 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 TFS Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Hawaii and TFS Financial.

Diversification Opportunities for Bank of Hawaii and TFS Financial

0.84

Correlation Coefficient

Bank of Hawaii  TFS Financial

Very poor diversification

The 3 months correlation between Bank and TFS is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Hawaii and TFS Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFS Financial 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 TFS Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFS Financial has no effect on the direction of Bank of Hawaii i.e., Bank of Hawaii and TFS Financial go up and down completely randomly.

Pair Corralation between Bank of Hawaii and TFS Financial

Considering the 90-day investment horizon Bank of Hawaii is expected to generate 1.38 times more return on investment than TFS Financial. However, Bank of Hawaii is 1.38 times more volatile than TFS Financial. It trades about -0.24 of its potential returns per unit of risk. TFS Financial is currently generating about -0.33 per unit of risk. If you would invest  7,577  in Bank of Hawaii on October 10, 2024 and sell it today you would lose (617.00) from holding Bank of Hawaii or give up 8.14% of portfolio value over 90 days.

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

Bank of Hawaii  vs.  TFS Financial

Bank of Hawaii

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Hawaii are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Bank of Hawaii may actually be approaching a critical reversion point that can send shares even higher in February 2025.

TFS Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TFS Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, TFS Financial is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bank of Hawaii and TFS Financial

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

The idea behind Bank of Hawaii and TFS Financial 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.