Correlation Between Home BancShares and Republic Bancorp

Can any of the company-specific risk be diversified away by investing in both Home BancShares and Republic 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 Home BancShares and Republic Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Home BancShares and Republic Bancorp, you can compare the effects of market volatilities on Home BancShares and Republic 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 Home BancShares with a short position of Republic Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home BancShares and Republic Bancorp.

Diversification Opportunities for Home BancShares and Republic Bancorp

0.19

Correlation Coefficient

Home BancShares  Republic Bancorp

Average diversification

The 3 months correlation between Home and Republic is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Home BancShares and Republic Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Republic Bancorp and Home BancShares 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 Home BancShares are associated (or correlated) with Republic Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Republic Bancorp has no effect on the direction of Home BancShares i.e., Home BancShares and Republic Bancorp go up and down completely randomly.

Pair Corralation between Home BancShares and Republic Bancorp

Given the investment horizon of 90 days Home BancShares is expected to generate 0.89 times more return on investment than Republic Bancorp. However, Home BancShares is 1.12 times less risky than Republic Bancorp. It trades about 0.04 of its potential returns per unit of risk. Republic Bancorp is currently generating about -0.09 per unit of risk. If you would invest  2,791  in Home BancShares on December 20, 2024 and sell it today you would earn a total of  70.00  from holding Home BancShares or generate 2.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Home BancShares  vs.  Republic Bancorp

Home BancShares

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Home BancShares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Home BancShares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Republic Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Republic Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Home BancShares and Republic Bancorp

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

The idea behind Home BancShares and Republic 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.