Correlation Between Central Pacific and Pinnacle Bank

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

Diversification Opportunities for Central Pacific and Pinnacle Bank

0.55

Correlation Coefficient

Central Pacific  Pinnacle Bank

Very weak diversification

The 3 months correlation between Central and Pinnacle is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Central Pacific Financial and Pinnacle Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle Bank 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 Pinnacle Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle Bank has no effect on the direction of Central Pacific i.e., Central Pacific and Pinnacle Bank go up and down completely randomly.

Pair Corralation between Central Pacific and Pinnacle Bank

Considering the 90-day investment horizon Central Pacific Financial is expected to under-perform the Pinnacle Bank. In addition to that, Central Pacific is 1.65 times more volatile than Pinnacle Bank. It trades about -0.03 of its total potential returns per unit of risk. Pinnacle Bank is currently generating about 0.07 per unit of volatility. If you would invest  1,865  in Pinnacle Bank on December 26, 2024 and sell it today you would earn a total of  85.00  from holding Pinnacle Bank or generate 4.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Central Pacific Financial  vs.  Pinnacle Bank

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.

Pinnacle Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pinnacle Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Pinnacle Bank 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 Pinnacle Bank

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

The idea behind Central Pacific Financial and Pinnacle Bank 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..