Correlation Between Central Pacific and Lewis Clark

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

Diversification Opportunities for Central Pacific and Lewis Clark

0.04

Correlation Coefficient

Central Pacific  Lewis Clark

Significant diversification

The 3 months correlation between Central and Lewis is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Central Pacific Financial and Lewis Clark Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lewis Clark Bancorp 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 Lewis Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lewis Clark Bancorp has no effect on the direction of Central Pacific i.e., Central Pacific and Lewis Clark go up and down completely randomly.

Pair Corralation between Central Pacific and Lewis Clark

Considering the 90-day investment horizon Central Pacific Financial is expected to generate 0.8 times more return on investment than Lewis Clark. However, Central Pacific Financial is 1.25 times less risky than Lewis Clark. It trades about 0.06 of its potential returns per unit of risk. Lewis Clark Bancorp is currently generating about 0.0 per unit of risk. If you would invest  1,699  in Central Pacific Financial on December 2, 2024 and sell it today you would earn a total of  1,205  from holding Central Pacific Financial or generate 70.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	64.65%
Values	Daily Returns

Central Pacific Financial  vs.  Lewis Clark Bancorp

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.

Lewis Clark Bancorp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lewis Clark Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Lewis Clark 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 Central Pacific and Lewis Clark

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

The idea behind Central Pacific Financial and Lewis Clark 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.