Correlation Between Farmers Bank and First Hawaiian

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

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

Diversification Opportunities for Farmers Bank and First Hawaiian

0.37

Correlation Coefficient

Farmers Bank  First Hawaiian

Weak diversification

The 3 months correlation between Farmers and First is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding The Farmers Bank and First Hawaiian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Hawaiian and Farmers Bank 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 The Farmers Bank 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 Farmers Bank i.e., Farmers Bank and First Hawaiian go up and down completely randomly.

Pair Corralation between Farmers Bank and First Hawaiian

Given the investment horizon of 90 days Farmers Bank is expected to generate 6.58 times less return on investment than First Hawaiian. But when comparing it to its historical volatility, The Farmers Bank is 2.28 times less risky than First Hawaiian. It trades about 0.06 of its potential returns per unit of risk. First Hawaiian is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,244  in First Hawaiian on September 12, 2024 and sell it today you would earn a total of  498.00  from holding First Hawaiian or generate 22.19% return on investment over 90 days.

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

The Farmers Bank  vs.  First Hawaiian

Farmers Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Farmers Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Farmers Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

First Hawaiian

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Hawaiian are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting technical indicators, First Hawaiian sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Farmers Bank and First Hawaiian

The main advantage of trading using opposite Farmers Bank and First Hawaiian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers Bank 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 The Farmers Bank 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.