Correlation Between Bank Negara and First Hawaiian

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

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

Diversification Opportunities for Bank Negara and First Hawaiian

-0.68

Correlation Coefficient

Bank Negara  First Hawaiian

Excellent diversification

The 3 months correlation between Bank and First is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and First Hawaiian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Hawaiian and Bank Negara 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 Bank Negara Indonesia 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 Bank Negara i.e., Bank Negara and First Hawaiian go up and down completely randomly.

Pair Corralation between Bank Negara and First Hawaiian

Assuming the 90 days horizon Bank Negara Indonesia is expected to under-perform the First Hawaiian. In addition to that, Bank Negara is 2.39 times more volatile than First Hawaiian. It trades about -0.01 of its total potential returns per unit of risk. First Hawaiian is currently generating about 0.12 per unit of volatility. If you would invest  2,385  in First Hawaiian on September 3, 2024 and sell it today you would earn a total of  376.00  from holding First Hawaiian or generate 15.77% return on investment over 90 days.

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

Bank Negara Indonesia  vs.  First Hawaiian

Bank Negara Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Bank Negara and First Hawaiian

The main advantage of trading using opposite Bank Negara and First Hawaiian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Negara 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 Bank Negara Indonesia 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.