Correlation Between Central Pacific and Bank of San Francisco

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

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

Diversification Opportunities for Central Pacific and Bank of San Francisco

-0.4

Correlation Coefficient

Central Pacific  Bank of San Francisco

Very good diversification

The 3 months correlation between Central and Bank is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Central Pacific Financial and Bank of San in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of San Francisco and Central Pacific 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 Central Pacific Financial are associated (or correlated) with Bank of San Francisco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of San Francisco has no effect on the direction of Central Pacific i.e., Central Pacific and Bank of San Francisco go up and down completely randomly.

Pair Corralation between Central Pacific and Bank of San Francisco

Considering the 90-day investment horizon Central Pacific Financial is expected to under-perform the Bank of San Francisco. In addition to that, Central Pacific is 1.34 times more volatile than Bank of San. It trades about -0.02 of its total potential returns per unit of risk. Bank of San is currently generating about 0.01 per unit of volatility. If you would invest  3,200  in Bank of San on December 27, 2024 and sell it today you would earn a total of  0.00  from holding Bank of San or generate 0.0% return on investment over 90 days.

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

Central Pacific Financial  vs.  Bank of San

Central Pacific Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Pacific Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Central Pacific is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Bank of San Francisco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of San has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Bank of San Francisco is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Central Pacific and Bank of San Francisco

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

The idea behind Central Pacific Financial and Bank of San 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.