Correlation Between First Hawaiian and TFS Financial

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

By analyzing existing cross correlation between First Hawaiian and TFS Financial, you can compare the effects of market volatilities on First Hawaiian and TFS Financial 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 TFS Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Hawaiian and TFS Financial.

Diversification Opportunities for First Hawaiian and TFS Financial

0.85

Correlation Coefficient

First Hawaiian  TFS Financial

Very poor diversification

The 3 months correlation between First and TFS is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding First Hawaiian and TFS Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFS Financial 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 TFS Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFS Financial has no effect on the direction of First Hawaiian i.e., First Hawaiian and TFS Financial go up and down completely randomly.

Pair Corralation between First Hawaiian and TFS Financial

Considering the 90-day investment horizon First Hawaiian is expected to generate 1.16 times more return on investment than TFS Financial. However, First Hawaiian is 1.16 times more volatile than TFS Financial. It trades about 0.11 of its potential returns per unit of risk. TFS Financial is currently generating about -0.07 per unit of risk. If you would invest  2,570  in First Hawaiian on October 24, 2024 and sell it today you would earn a total of  59.00  from holding First Hawaiian or generate 2.3% return on investment over 90 days.

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

First Hawaiian  vs.  TFS Financial

First Hawaiian

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Hawaiian are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting technical indicators, First Hawaiian may actually be approaching a critical reversion point that can send shares even higher in February 2025.

TFS Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TFS Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, TFS Financial 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 First Hawaiian and TFS Financial

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

The idea behind First Hawaiian and TFS Financial 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.