Correlation Between Central Pacific and CIB Marine

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

Diversification Opportunities for Central Pacific and CIB Marine

0.16

Correlation Coefficient

Central Pacific  CIB Marine

Average diversification

The 3 months correlation between Central and CIB is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Central Pacific Financial and CIB Marine Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIB Marine Bancshares 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 CIB Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIB Marine Bancshares has no effect on the direction of Central Pacific i.e., Central Pacific and CIB Marine go up and down completely randomly.

Pair Corralation between Central Pacific and CIB Marine

Considering the 90-day investment horizon Central Pacific Financial is expected to under-perform the CIB Marine. But the stock apears to be less risky and, when comparing its historical volatility, Central Pacific Financial is 1.15 times less risky than CIB Marine. The stock trades about -0.02 of its potential returns per unit of risk. The CIB Marine Bancshares is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,680  in CIB Marine Bancshares on December 27, 2024 and sell it today you would earn a total of  270.00  from holding CIB Marine Bancshares or generate 10.07% return on investment over 90 days.

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

Central Pacific Financial  vs.  CIB Marine Bancshares

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.

CIB Marine Bancshares

Risk-Adjusted Performance

Modest

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

Pair Trading with Central Pacific and CIB Marine

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

The idea behind Central Pacific Financial and CIB Marine Bancshares 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.