Correlation Between First Bancorp and Bank of Hawaii

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

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

Diversification Opportunities for First Bancorp and Bank of Hawaii

0.32

Correlation Coefficient

First Bancorp  Bank of Hawaii

Weak diversification

The 3 months correlation between First and Bank is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Bank of Hawaii in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Hawaii and First Bancorp 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 First Bancorp are associated (or correlated) with Bank of Hawaii. 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 Hawaii has no effect on the direction of First Bancorp i.e., First Bancorp and Bank of Hawaii go up and down completely randomly.

Pair Corralation between First Bancorp and Bank of Hawaii

Considering the 90-day investment horizon First Bancorp is expected to generate 73.98 times less return on investment than Bank of Hawaii. In addition to that, First Bancorp is 1.17 times more volatile than Bank of Hawaii. It trades about 0.0 of its total potential returns per unit of risk. Bank of Hawaii is currently generating about 0.15 per unit of volatility. If you would invest  6,449  in Bank of Hawaii on September 2, 2024 and sell it today you would earn a total of  1,449  from holding Bank of Hawaii or generate 22.47% return on investment over 90 days.

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

First Bancorp  vs.  Bank of Hawaii

First Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, First Bancorp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Bank of Hawaii

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Hawaii are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Bank of Hawaii demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Bancorp and Bank of Hawaii

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

The idea behind First Bancorp and Bank of Hawaii 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.