Correlation Between CullenFrost Bankers and Bank of Hawaii

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

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

Diversification Opportunities for CullenFrost Bankers and Bank of Hawaii

0.94

Correlation Coefficient

CullenFrost Bankers  Bank of Hawaii

Almost no diversification

The 3 months correlation between CullenFrost and Bank is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding CullenFrost Bankers and Bank of Hawaii in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Hawaii and CullenFrost Bankers 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 CullenFrost Bankers are associated (or correlated) with Bank of Hawaii. 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 Hawaii has no effect on the direction of CullenFrost Bankers i.e., CullenFrost Bankers and Bank of Hawaii go up and down completely randomly.

Pair Corralation between CullenFrost Bankers and Bank of Hawaii

Assuming the 90 days trading horizon CullenFrost Bankers is expected to under-perform the Bank of Hawaii. But the preferred stock apears to be less risky and, when comparing its historical volatility, CullenFrost Bankers is 1.18 times less risky than Bank of Hawaii. The preferred stock trades about -0.13 of its potential returns per unit of risk. The Bank of Hawaii is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,774  in Bank of Hawaii on September 4, 2024 and sell it today you would lose (98.00) from holding Bank of Hawaii or give up 5.52% of portfolio value over 90 days.

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

CullenFrost Bankers  vs.  Bank of Hawaii

CullenFrost Bankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CullenFrost Bankers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Bank of Hawaii

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CullenFrost Bankers and Bank of Hawaii

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

The idea behind CullenFrost Bankers and Bank of Hawaii 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.