Correlation Between First Republic and Valley National

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

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

Diversification Opportunities for First Republic and Valley National

-0.71

Correlation Coefficient

First Republic  Valley National

Pay attention - limited upside

The 3 months correlation between First and Valley is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding First Republic Bank and Valley National Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valley National Bancorp and First Republic 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 First Republic Bank are associated (or correlated) with Valley National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valley National Bancorp has no effect on the direction of First Republic i.e., First Republic and Valley National go up and down completely randomly.

Pair Corralation between First Republic and Valley National

If you would invest  2,426  in Valley National Bancorp on September 12, 2024 and sell it today you would earn a total of  74.00  from holding Valley National Bancorp or generate 3.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

First Republic Bank  vs.  Valley National Bancorp

First Republic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Republic Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, First Republic is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Valley National Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Valley National Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Valley National is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Republic and Valley National

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

The idea behind First Republic Bank and Valley National 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.