Correlation Between First Republic and CF Bankshares

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

Diversification Opportunities for First Republic and CF Bankshares

-0.46

Correlation Coefficient

First Republic  CF Bankshares

Very good diversification

The 3 months correlation between First and CFBK is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding First Republic Bank and CF Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Bankshares 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 CF Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Bankshares has no effect on the direction of First Republic i.e., First Republic and CF Bankshares go up and down completely randomly.

Pair Corralation between First Republic and CF Bankshares

If you would invest  2,193  in CF Bankshares on September 11, 2024 and sell it today you would earn a total of  584.00  from holding CF Bankshares or generate 26.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

First Republic Bank  vs.  CF Bankshares

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. Despite quite persistent technical indicators, First Republic is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

CF Bankshares

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Bankshares are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, CF Bankshares disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Republic and CF Bankshares

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

The idea behind First Republic Bank and CF Bankshares 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.