Correlation Between National Bank and Republic Bancorp

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

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

Diversification Opportunities for National Bank and Republic Bancorp

0.67

Correlation Coefficient

National Bank  Republic Bancorp

Poor diversification

The 3 months correlation between National and Republic is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Republic Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Republic Bancorp and National Bank 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 National Bank Holdings 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 National Bank i.e., National Bank and Republic Bancorp go up and down completely randomly.

Pair Corralation between National Bank and Republic Bancorp

Given the investment horizon of 90 days National Bank Holdings is expected to under-perform the Republic Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, National Bank Holdings is 1.13 times less risky than Republic Bancorp. The stock trades about -0.1 of its potential returns per unit of risk. The Republic Bancorp is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  6,963  in Republic Bancorp on December 30, 2024 and sell it today you would lose (518.00) from holding Republic Bancorp or give up 7.44% of portfolio value over 90 days.

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

National Bank Holdings  vs.  Republic Bancorp

National Bank Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 National Bank and Republic Bancorp

The main advantage of trading using opposite National Bank and Republic Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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 National Bank Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.