Correlation Between OTP Bank and First Hawaiian

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

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

Diversification Opportunities for OTP Bank and First Hawaiian

0.09

Correlation Coefficient

OTP Bank  First Hawaiian

Significant diversification

The 3 months correlation between OTP and First is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding OTP Bank Nyrt and First Hawaiian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Hawaiian and OTP Bank 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 OTP Bank Nyrt are associated (or correlated) with First Hawaiian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Hawaiian has no effect on the direction of OTP Bank i.e., OTP Bank and First Hawaiian go up and down completely randomly.

Pair Corralation between OTP Bank and First Hawaiian

Assuming the 90 days horizon OTP Bank Nyrt is expected to generate 1.26 times more return on investment than First Hawaiian. However, OTP Bank is 1.26 times more volatile than First Hawaiian. It trades about 0.19 of its potential returns per unit of risk. First Hawaiian is currently generating about -0.08 per unit of risk. If you would invest  5,218  in OTP Bank Nyrt on December 19, 2024 and sell it today you would earn a total of  1,138  from holding OTP Bank Nyrt or generate 21.81% return on investment over 90 days.

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

OTP Bank Nyrt  vs.  First Hawaiian

OTP Bank Nyrt

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OTP Bank Nyrt are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, OTP Bank reported solid returns over the last few months and may actually be approaching a breakup point.

First Hawaiian

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Hawaiian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with OTP Bank and First Hawaiian

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

The idea behind OTP Bank Nyrt and First Hawaiian 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.