Correlation Between HomeStreet and Bank of Hawaii

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

Diversification Opportunities for HomeStreet and Bank of Hawaii

-0.63

Correlation Coefficient

HomeStreet  Bank of Hawaii

Excellent diversification

The 3 months correlation between HomeStreet and Bank is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding HomeStreet 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 HomeStreet 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 HomeStreet 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 HomeStreet i.e., HomeStreet and Bank of Hawaii go up and down completely randomly.

Pair Corralation between HomeStreet and Bank of Hawaii

Given the investment horizon of 90 days HomeStreet is expected to under-perform the Bank of Hawaii. In addition to that, HomeStreet is 1.83 times more volatile than Bank of Hawaii. It trades about -0.01 of its total potential returns per unit of risk. Bank of Hawaii is currently generating about 0.01 per unit of volatility. If you would invest  7,188  in Bank of Hawaii on September 28, 2024 and sell it today you would lose (149.00) from holding Bank of Hawaii or give up 2.07% of portfolio value over 90 days.

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

HomeStreet  vs.  Bank of Hawaii

HomeStreet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HomeStreet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Bank of Hawaii

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Hawaii are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Bank of Hawaii demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HomeStreet and Bank of Hawaii

The main advantage of trading using opposite HomeStreet and Bank of Hawaii positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HomeStreet 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 HomeStreet 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.