Correlation Between First Republic and IF Bancorp

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

Diversification Opportunities for First Republic and IF Bancorp

-0.47

Correlation Coefficient

First Republic  IF Bancorp

Very good diversification

The 3 months correlation between First and IROQ is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding First Republic Bank and IF Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IF Bancorp 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 IF Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IF Bancorp has no effect on the direction of First Republic i.e., First Republic and IF Bancorp go up and down completely randomly.

Pair Corralation between First Republic and IF Bancorp

Assuming the 90 days horizon First Republic Bank is expected to under-perform the IF Bancorp. In addition to that, First Republic is 11.35 times more volatile than IF Bancorp. It trades about -0.03 of its total potential returns per unit of risk. IF Bancorp is currently generating about 0.05 per unit of volatility. If you would invest  1,644  in IF Bancorp on September 20, 2024 and sell it today you would earn a total of  681.00  from holding IF Bancorp or generate 41.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	29.41%
Values	Daily Returns

First Republic Bank  vs.  IF Bancorp

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 forward indicators, First Republic is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

IF Bancorp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IF Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IF Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Republic and IF Bancorp

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

The idea behind First Republic Bank and IF Bancorp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.