Correlation Between Territorial Bancorp and Bank of San Francisco

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

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

Diversification Opportunities for Territorial Bancorp and Bank of San Francisco

0.41

Correlation Coefficient

Territorial Bancorp  Bank of San Francisco

Very weak diversification

The 3 months correlation between Territorial and Bank is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Territorial Bancorp and Bank of San in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of San Francisco and Territorial 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 Territorial Bancorp are associated (or correlated) with Bank of San Francisco. 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 San Francisco has no effect on the direction of Territorial Bancorp i.e., Territorial Bancorp and Bank of San Francisco go up and down completely randomly.

Pair Corralation between Territorial Bancorp and Bank of San Francisco

Given the investment horizon of 90 days Territorial Bancorp is expected to under-perform the Bank of San Francisco. In addition to that, Territorial Bancorp is 1.45 times more volatile than Bank of San. It trades about -0.13 of its total potential returns per unit of risk. Bank of San is currently generating about -0.05 per unit of volatility. If you would invest  3,200  in Bank of San on December 29, 2024 and sell it today you would lose (125.00) from holding Bank of San or give up 3.91% of portfolio value over 90 days.

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

Territorial Bancorp  vs.  Bank of San

Territorial Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Territorial Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Bank of San Francisco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of San has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Bank of San Francisco is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Territorial Bancorp and Bank of San Francisco

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

The idea behind Territorial Bancorp and Bank of San 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.