Correlation Between First Republic and Promotora

Can any of the company-specific risk be diversified away by investing in both First Republic and Promotora 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 Promotora 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 Promotora y Operadora, you can compare the effects of market volatilities on First Republic and Promotora 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 Promotora. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Republic and Promotora.

Diversification Opportunities for First Republic and Promotora

0.0

Correlation Coefficient

First Republic  Promotora

Pay attention - limited upside

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

Pair Corralation between First Republic and Promotora

Assuming the 90 days trading horizon First Republic Bank is expected to under-perform the Promotora. In addition to that, First Republic is 3.72 times more volatile than Promotora y Operadora. It trades about -0.08 of its total potential returns per unit of risk. Promotora y Operadora is currently generating about 0.06 per unit of volatility. If you would invest  9,816  in Promotora y Operadora on October 10, 2024 and sell it today you would earn a total of  5,184  from holding Promotora y Operadora or generate 52.81% 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.  Promotora y Operadora

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.

Promotora y Operadora

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Promotora y Operadora are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Promotora disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Republic and Promotora

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

The idea behind First Republic Bank and Promotora y Operadora 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 Transaction History module to view history of all your transactions and understand their impact on performance.