Correlation Between First Republic and BHP

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

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

Diversification Opportunities for First Republic and BHP

0.0

Correlation Coefficient

First Republic  BHP

Pay attention - limited upside

The 3 months correlation between First and BHP is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Republic Bank and BHP Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group and First Republic 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 Republic Bank are associated (or correlated) with BHP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group has no effect on the direction of First Republic i.e., First Republic and BHP go up and down completely randomly.

Pair Corralation between First Republic and BHP

If you would invest  113,920  in BHP Group on September 25, 2024 and sell it today you would earn a total of  0.00  from holding BHP Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

First Republic Bank  vs.  BHP Group

First Republic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

BHP Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BHP showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Republic and BHP

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

The idea behind First Republic Bank and BHP Group 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.