Correlation Between First Hawaiian and DBS Group

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

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

Diversification Opportunities for First Hawaiian and DBS Group

0.69

Correlation Coefficient

First Hawaiian  DBS Group

Poor diversification

The 3 months correlation between First and DBS is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding First Hawaiian and DBS Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBS Group Holdings and First Hawaiian 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 Hawaiian are associated (or correlated) with DBS Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBS Group Holdings has no effect on the direction of First Hawaiian i.e., First Hawaiian and DBS Group go up and down completely randomly.

Pair Corralation between First Hawaiian and DBS Group

Considering the 90-day investment horizon First Hawaiian is expected to generate 3.18 times less return on investment than DBS Group. But when comparing it to its historical volatility, First Hawaiian is 1.37 times less risky than DBS Group. It trades about 0.02 of its potential returns per unit of risk. DBS Group Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,048  in DBS Group Holdings on September 26, 2024 and sell it today you would earn a total of  1,230  from holding DBS Group Holdings or generate 60.06% return on investment over 90 days.

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

First Hawaiian  vs.  DBS Group Holdings

First Hawaiian

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Hawaiian are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting technical indicators, First Hawaiian sustained solid returns over the last few months and may actually be approaching a breakup point.

DBS Group Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DBS Group Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, DBS Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Hawaiian and DBS Group

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

The idea behind First Hawaiian and DBS Group Holdings 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.