Correlation Between Territorial Bancorp and 1st Colonial

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Can any of the company-specific risk be diversified away by investing in both Territorial Bancorp and 1st Colonial 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 1st Colonial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Territorial Bancorp and 1st Colonial Bancorp, you can compare the effects of market volatilities on Territorial Bancorp and 1st Colonial 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 1st Colonial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Territorial Bancorp and 1st Colonial.

Diversification Opportunities for Territorial Bancorp and 1st Colonial

-0.59
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Territorial and 1st is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Territorial Bancorp and 1st Colonial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1st Colonial Bancorp 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 1st Colonial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1st Colonial Bancorp has no effect on the direction of Territorial Bancorp i.e., Territorial Bancorp and 1st Colonial go up and down completely randomly.

Pair Corralation between Territorial Bancorp and 1st Colonial

Given the investment horizon of 90 days Territorial Bancorp is expected to generate 2.76 times more return on investment than 1st Colonial. However, Territorial Bancorp is 2.76 times more volatile than 1st Colonial Bancorp. It trades about 0.09 of its potential returns per unit of risk. 1st Colonial Bancorp is currently generating about -0.03 per unit of risk. If you would invest  944.00  in Territorial Bancorp on September 6, 2024 and sell it today you would earn a total of  129.00  from holding Territorial Bancorp or generate 13.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Territorial Bancorp  vs.  1st Colonial Bancorp

 Performance 
       Timeline  
Territorial Bancorp 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Territorial Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Territorial Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.
1st Colonial Bancorp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days 1st Colonial Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 1st Colonial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Territorial Bancorp and 1st Colonial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Territorial Bancorp and 1st Colonial

The main advantage of trading using opposite Territorial Bancorp and 1st Colonial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Territorial Bancorp position performs unexpectedly, 1st Colonial 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 1st Colonial will offset losses from the drop in 1st Colonial's long position.
The idea behind Territorial Bancorp and 1st Colonial Bancorp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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