Correlation Between First Republic and First Bancshares

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

Diversification Opportunities for First Republic and First Bancshares

0.0

Correlation Coefficient

First Republic  First Bancshares

Pay attention - limited upside

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

Pair Corralation between First Republic and First Bancshares

If you would invest  1,369  in First Bancshares on December 19, 2024 and sell it today you would lose (34.00) from holding First Bancshares or give up 2.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

First Republic Bank  vs.  First Bancshares

First Republic Bank

Risk-Adjusted Performance

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 forward 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.

First Bancshares

Risk-Adjusted Performance

Weak

Over the last 90 days First Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, First Bancshares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Republic and First Bancshares

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

The idea behind First Republic Bank and First Bancshares 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..