Correlation Between ServisFirst Bancshares and Republic Bancorp

Can any of the company-specific risk be diversified away by investing in both ServisFirst 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 ServisFirst 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 ServisFirst Bancshares and Republic Bancorp, you can compare the effects of market volatilities on ServisFirst 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 ServisFirst Bancshares with a short position of Republic Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServisFirst Bancshares and Republic Bancorp.

Diversification Opportunities for ServisFirst Bancshares and Republic Bancorp

0.93

Correlation Coefficient

ServisFirst Bancshares  Republic Bancorp

Almost no diversification

The 3 months correlation between ServisFirst and Republic is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding ServisFirst Bancshares and Republic Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Republic Bancorp and ServisFirst 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 ServisFirst 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 ServisFirst Bancshares i.e., ServisFirst Bancshares and Republic Bancorp go up and down completely randomly.

Pair Corralation between ServisFirst Bancshares and Republic Bancorp

Given the investment horizon of 90 days ServisFirst Bancshares is expected to generate 1.2 times more return on investment than Republic Bancorp. However, ServisFirst Bancshares is 1.2 times more volatile than Republic Bancorp. It trades about 0.04 of its potential returns per unit of risk. Republic Bancorp is currently generating about -0.16 per unit of risk. If you would invest  8,642  in ServisFirst Bancshares on October 25, 2024 and sell it today you would earn a total of  88.00  from holding ServisFirst Bancshares or generate 1.02% return on investment over 90 days.

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

ServisFirst Bancshares  vs.  Republic Bancorp

ServisFirst Bancshares

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ServisFirst Bancshares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental drivers, ServisFirst Bancshares may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Republic Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Republic Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Republic Bancorp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ServisFirst Bancshares and Republic Bancorp

The main advantage of trading using opposite ServisFirst Bancshares and Republic Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServisFirst 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 ServisFirst 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.