Correlation Between Territorial Bancorp and Mountain Commerce

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

By analyzing existing cross correlation between Territorial Bancorp and Mountain Commerce Bancorp, you can compare the effects of market volatilities on Territorial Bancorp and Mountain Commerce 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 Mountain Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Territorial Bancorp and Mountain Commerce.

Diversification Opportunities for Territorial Bancorp and Mountain Commerce

-0.29

Correlation Coefficient

Territorial Bancorp  Mountain Commerce

Very good diversification

The 3 months correlation between Territorial and Mountain is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Territorial Bancorp and Mountain Commerce Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Commerce 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 Mountain Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Commerce Bancorp has no effect on the direction of Territorial Bancorp i.e., Territorial Bancorp and Mountain Commerce go up and down completely randomly.

Pair Corralation between Territorial Bancorp and Mountain Commerce

Given the investment horizon of 90 days Territorial Bancorp is expected to under-perform the Mountain Commerce. In addition to that, Territorial Bancorp is 2.12 times more volatile than Mountain Commerce Bancorp. It trades about -0.13 of its total potential returns per unit of risk. Mountain Commerce Bancorp is currently generating about -0.21 per unit of volatility. If you would invest  2,145  in Mountain Commerce Bancorp on December 30, 2024 and sell it today you would lose (169.00) from holding Mountain Commerce Bancorp or give up 7.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	72.58%
Values	Daily Returns

Territorial Bancorp  vs.  Mountain Commerce Bancorp

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.

Mountain Commerce Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mountain Commerce Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Territorial Bancorp and Mountain Commerce

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

The idea behind Territorial Bancorp and Mountain Commerce 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.