Correlation Between First Republic and Luxfer Holdings

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

Diversification Opportunities for First Republic and Luxfer Holdings

-0.4

Correlation Coefficient

First Republic  Luxfer Holdings

Very good diversification

The 3 months correlation between First and Luxfer is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding First Republic Bank and Luxfer Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luxfer Holdings PLC 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 Luxfer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luxfer Holdings PLC has no effect on the direction of First Republic i.e., First Republic and Luxfer Holdings go up and down completely randomly.

Pair Corralation between First Republic and Luxfer Holdings

Assuming the 90 days horizon First Republic Bank is expected to under-perform the Luxfer Holdings. In addition to that, First Republic is 13.26 times more volatile than Luxfer Holdings PLC. It trades about -0.04 of its total potential returns per unit of risk. Luxfer Holdings PLC is currently generating about 0.0 per unit of volatility. If you would invest  1,559  in Luxfer Holdings PLC on October 23, 2024 and sell it today you would lose (176.00) from holding Luxfer Holdings PLC or give up 11.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	24.24%
Values	Daily Returns

First Republic Bank  vs.  Luxfer Holdings PLC

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

Luxfer Holdings PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Luxfer Holdings PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Luxfer Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Republic and Luxfer Holdings

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

The idea behind First Republic Bank and Luxfer Holdings PLC 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.