Correlation Between Hope Bancorp and Hanmi Financial

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

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

Diversification Opportunities for Hope Bancorp and Hanmi Financial

0.69

Correlation Coefficient

Hope Bancorp  Hanmi Financial

Poor diversification

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

Pair Corralation between Hope Bancorp and Hanmi Financial

Given the investment horizon of 90 days Hope Bancorp is expected to under-perform the Hanmi Financial. But the stock apears to be less risky and, when comparing its historical volatility, Hope Bancorp is 1.18 times less risky than Hanmi Financial. The stock trades about -0.21 of its potential returns per unit of risk. The Hanmi Financial is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  2,616  in Hanmi Financial on November 29, 2024 and sell it today you would lose (267.00) from holding Hanmi Financial or give up 10.21% of portfolio value over 90 days.

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

Hope Bancorp  vs.  Hanmi Financial

Hope Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hope Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Hanmi Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hanmi Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Hope Bancorp and Hanmi Financial

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

The idea behind Hope Bancorp and Hanmi 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.