Correlation Between Republic Bancorp and MT Bank

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

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

Diversification Opportunities for Republic Bancorp and MT Bank

0.96

Correlation Coefficient

Republic Bancorp  MT Bank

Almost no diversification

The 3 months correlation between Republic and MTB is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Republic Bancorp and MT Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MT Bank and Republic Bancorp 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 Republic Bancorp are associated (or correlated) with MT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MT Bank has no effect on the direction of Republic Bancorp i.e., Republic Bancorp and MT Bank go up and down completely randomly.

Pair Corralation between Republic Bancorp and MT Bank

Assuming the 90 days horizon Republic Bancorp is expected to generate 2.9 times less return on investment than MT Bank. In addition to that, Republic Bancorp is 1.2 times more volatile than MT Bank. It trades about 0.04 of its total potential returns per unit of risk. MT Bank is currently generating about 0.13 per unit of volatility. If you would invest  16,909  in MT Bank on June 29, 2024 and sell it today you would earn a total of  633.00  from holding MT Bank or generate 3.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Republic Bancorp  vs.  MT Bank

Republic Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Republic Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Republic Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.

MT Bank

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MT Bank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MT Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Republic Bancorp and MT Bank

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

The idea behind Republic Bancorp and MT Bank 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.