Correlation Between Territorial Bancorp and TFS Financial

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

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

Diversification Opportunities for Territorial Bancorp and TFS Financial

0.44

Correlation Coefficient

Territorial Bancorp  TFS Financial

Very weak diversification

The 3 months correlation between Territorial and TFS is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Territorial Bancorp and TFS Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFS Financial 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 TFS Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFS Financial has no effect on the direction of Territorial Bancorp i.e., Territorial Bancorp and TFS Financial go up and down completely randomly.

Pair Corralation between Territorial Bancorp and TFS Financial

Given the investment horizon of 90 days Territorial Bancorp is expected to under-perform the TFS Financial. In addition to that, Territorial Bancorp is 1.7 times more volatile than TFS Financial. It trades about -0.28 of its total potential returns per unit of risk. TFS Financial is currently generating about -0.33 per unit of volatility. If you would invest  1,361  in TFS Financial on October 10, 2024 and sell it today you would lose (110.00) from holding TFS Financial or give up 8.08% 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.  TFS Financial

Territorial Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Territorial Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

TFS Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TFS Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, TFS Financial is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Territorial Bancorp and TFS Financial

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

The idea behind Territorial Bancorp and TFS 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.