Correlation Between First Republic and Provident Financial

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

Diversification Opportunities for First Republic and Provident Financial

0.0

Correlation Coefficient

First Republic  Provident Financial

Pay attention - limited upside

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

Pair Corralation between First Republic and Provident Financial

If you would invest  1,422  in Provident Financial Holdings on October 3, 2024 and sell it today you would earn a total of  169.00  from holding Provident Financial Holdings or generate 11.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.61%
Values	Daily Returns

First Republic Bank  vs.  Provident Financial Holdings

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 newest stock price mess, may contribute to short-term losses for the institutional investors.

Provident Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Provident Financial Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Provident Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with First Republic and Provident Financial

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

The idea behind First Republic Bank and Provident Financial Holdings 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.