Correlation Between First Hawaiian and Mission Valley

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

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

Diversification Opportunities for First Hawaiian and Mission Valley

0.66

Correlation Coefficient

First Hawaiian  Mission Valley

Poor diversification

The 3 months correlation between First and Mission is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding First Hawaiian and Mission Valley Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mission Valley Bancorp and First Hawaiian 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 First Hawaiian are associated (or correlated) with Mission Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mission Valley Bancorp has no effect on the direction of First Hawaiian i.e., First Hawaiian and Mission Valley go up and down completely randomly.

Pair Corralation between First Hawaiian and Mission Valley

Considering the 90-day investment horizon First Hawaiian is expected to generate 1.77 times more return on investment than Mission Valley. However, First Hawaiian is 1.77 times more volatile than Mission Valley Bancorp. It trades about 0.12 of its potential returns per unit of risk. Mission Valley Bancorp is currently generating about 0.19 per unit of risk. If you would invest  2,332  in First Hawaiian on September 5, 2024 and sell it today you would earn a total of  378.00  from holding First Hawaiian or generate 16.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

First Hawaiian  vs.  Mission Valley Bancorp

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 somewhat conflicting technical indicators, First Hawaiian sustained solid returns over the last few months and may actually be approaching a breakup point.

Mission Valley Bancorp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mission Valley Bancorp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Mission Valley showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Hawaiian and Mission Valley

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

The idea behind First Hawaiian and Mission Valley 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.