Correlation Between Republic Bancorp and Central Pacific

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

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

Diversification Opportunities for Republic Bancorp and Central Pacific

0.89

Correlation Coefficient

Republic Bancorp  Central Pacific

Very poor diversification

The 3 months correlation between Republic and Central is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Republic Bancorp and Central Pacific Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Pacific Financial and Republic Bancorp 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 Republic Bancorp are associated (or correlated) with Central Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Pacific Financial has no effect on the direction of Republic Bancorp i.e., Republic Bancorp and Central Pacific go up and down completely randomly.

Pair Corralation between Republic Bancorp and Central Pacific

Assuming the 90 days horizon Republic Bancorp is expected to generate 0.9 times more return on investment than Central Pacific. However, Republic Bancorp is 1.11 times less risky than Central Pacific. It trades about 0.13 of its potential returns per unit of risk. Central Pacific Financial is currently generating about 0.09 per unit of risk. If you would invest  6,267  in Republic Bancorp on September 3, 2024 and sell it today you would earn a total of  1,361  from holding Republic Bancorp or generate 21.72% return on investment over 90 days.

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

Republic Bancorp  vs.  Central Pacific Financial

Republic Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Republic Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Republic Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.

Central Pacific Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Central Pacific Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Central Pacific reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Republic Bancorp and Central Pacific

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

The idea behind Republic Bancorp and Central Pacific Financial 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.