Correlation Between Republic Bancorp and Home BancShares

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

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

Diversification Opportunities for Republic Bancorp and Home BancShares

0.96

Correlation Coefficient

Republic Bancorp  Home BancShares

Almost no diversification

The 3 months correlation between Republic and Home is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Republic Bancorp and Home BancShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home BancShares 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 Home BancShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home BancShares has no effect on the direction of Republic Bancorp i.e., Republic Bancorp and Home BancShares go up and down completely randomly.

Pair Corralation between Republic Bancorp and Home BancShares

Assuming the 90 days horizon Republic Bancorp is expected to under-perform the Home BancShares. In addition to that, Republic Bancorp is 1.29 times more volatile than Home BancShares. It trades about -0.28 of its total potential returns per unit of risk. Home BancShares is currently generating about -0.28 per unit of volatility. If you would invest  3,041  in Home BancShares on October 10, 2024 and sell it today you would lose (242.00) from holding Home BancShares or give up 7.96% of portfolio value over 90 days.

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

Republic Bancorp  vs.  Home BancShares

Republic Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Republic Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Republic Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Home BancShares

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Home BancShares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady primary indicators, Home BancShares may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Republic Bancorp and Home BancShares

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

The idea behind Republic Bancorp and Home BancShares 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..