Correlation Between Hanmi Financial and RBB Bancorp

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

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

Diversification Opportunities for Hanmi Financial and RBB Bancorp

0.75

Correlation Coefficient

Hanmi Financial  RBB Bancorp

Poor diversification

The 3 months correlation between Hanmi and RBB is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hanmi Financial and RBB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBB Bancorp and Hanmi Financial 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 Hanmi Financial are associated (or correlated) with RBB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBB Bancorp has no effect on the direction of Hanmi Financial i.e., Hanmi Financial and RBB Bancorp go up and down completely randomly.

Pair Corralation between Hanmi Financial and RBB Bancorp

Given the investment horizon of 90 days Hanmi Financial is expected to generate 1.38 times more return on investment than RBB Bancorp. However, Hanmi Financial is 1.38 times more volatile than RBB Bancorp. It trades about 0.21 of its potential returns per unit of risk. RBB Bancorp is currently generating about 0.06 per unit of risk. If you would invest  1,924  in Hanmi Financial on August 31, 2024 and sell it today you would earn a total of  751.00  from holding Hanmi Financial or generate 39.03% return on investment over 90 days.

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

Hanmi Financial  vs.  RBB Bancorp

Hanmi Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hanmi Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Hanmi Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

RBB Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RBB Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, RBB Bancorp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Hanmi Financial and RBB Bancorp

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

The idea behind Hanmi Financial and RBB 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.