Correlation Between SBI Holdings and First Hawaiian

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

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

Diversification Opportunities for SBI Holdings and First Hawaiian

0.69

Correlation Coefficient

SBI Holdings  First Hawaiian

Poor diversification

The 3 months correlation between SBI and First is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SBI Holdings and First Hawaiian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Hawaiian and SBI Holdings 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 SBI Holdings 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 SBI Holdings i.e., SBI Holdings and First Hawaiian go up and down completely randomly.

Pair Corralation between SBI Holdings and First Hawaiian

Assuming the 90 days trading horizon SBI Holdings is expected to generate 1.26 times more return on investment than First Hawaiian. However, SBI Holdings is 1.26 times more volatile than First Hawaiian. It trades about -0.05 of its potential returns per unit of risk. First Hawaiian is currently generating about -0.26 per unit of risk. If you would invest  2,500  in SBI Holdings on October 9, 2024 and sell it today you would lose (40.00) from holding SBI Holdings or give up 1.6% of portfolio value over 90 days.

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

SBI Holdings  vs.  First Hawaiian

SBI Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SBI Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

First Hawaiian

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Hawaiian are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, First Hawaiian reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBI Holdings and First Hawaiian

The main advantage of trading using opposite SBI Holdings and First Hawaiian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBI Holdings 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 SBI Holdings 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.