Correlation Between Central Pacific and Washington Business

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

Diversification Opportunities for Central Pacific and Washington Business

0.0

Correlation Coefficient

Central Pacific  Washington Business

Pay attention - limited upside

The 3 months correlation between Central and Washington is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Central Pacific Financial and Washington Business Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Business 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 Washington Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Business Bank has no effect on the direction of Central Pacific i.e., Central Pacific and Washington Business go up and down completely randomly.

Pair Corralation between Central Pacific and Washington Business

If you would invest (100.00) in Washington Business Bank on December 30, 2024 and sell it today you would earn a total of  100.00  from holding Washington Business Bank or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Central Pacific Financial  vs.  Washington Business 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.

Washington Business Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Washington Business Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Washington Business is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Central Pacific and Washington Business

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

The idea behind Central Pacific Financial and Washington Business 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.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.