Correlation Between Microsoft and Republic Bancorp

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

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

Diversification Opportunities for Microsoft and Republic Bancorp

0.34

Correlation Coefficient

Microsoft  Republic Bancorp

Weak diversification

The 3 months correlation between Microsoft and Republic is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Republic Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Republic Bancorp and Microsoft 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 Microsoft are associated (or correlated) with Republic Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Republic Bancorp has no effect on the direction of Microsoft i.e., Microsoft and Republic Bancorp go up and down completely randomly.

Pair Corralation between Microsoft and Republic Bancorp

Given the investment horizon of 90 days Microsoft is expected to generate 25.47 times less return on investment than Republic Bancorp. But when comparing it to its historical volatility, Microsoft is 1.89 times less risky than Republic Bancorp. It trades about 0.01 of its potential returns per unit of risk. Republic Bancorp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,795  in Republic Bancorp on September 19, 2024 and sell it today you would earn a total of  714.00  from holding Republic Bancorp or generate 10.51% return on investment over 90 days.

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

Microsoft  vs.  Republic Bancorp

Microsoft

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Republic Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Republic Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Republic Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and Republic Bancorp

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

The idea behind Microsoft and Republic 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.