Correlation Between Republic Bancorp and Southern Missouri

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

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

Diversification Opportunities for Republic Bancorp and Southern Missouri

0.97

Correlation Coefficient

Republic Bancorp  Southern Missouri

Almost no diversification

The 3 months correlation between Republic and Southern is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Republic Bancorp and Southern Missouri Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Missouri Bancorp 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 Southern Missouri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Missouri Bancorp has no effect on the direction of Republic Bancorp i.e., Republic Bancorp and Southern Missouri go up and down completely randomly.

Pair Corralation between Republic Bancorp and Southern Missouri

Assuming the 90 days horizon Republic Bancorp is expected to generate 1.09 times more return on investment than Southern Missouri. However, Republic Bancorp is 1.09 times more volatile than Southern Missouri Bancorp. It trades about -0.17 of its potential returns per unit of risk. Southern Missouri Bancorp is currently generating about -0.26 per unit of risk. If you would invest  7,529  in Republic Bancorp on September 20, 2024 and sell it today you would lose (479.00) from holding Republic Bancorp or give up 6.36% 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.  Southern Missouri Bancorp

Republic Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Republic Bancorp are ranked lower than 4 (%) 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 January 2025.

Southern Missouri Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Missouri Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental drivers, Southern Missouri may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Republic Bancorp and Southern Missouri

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

The idea behind Republic Bancorp and Southern Missouri 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.