Correlation Between First Republic and Business First

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

Diversification Opportunities for First Republic and Business First

-0.48

Correlation Coefficient

First Republic  Business First

Very good diversification

The 3 months correlation between First and Business is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding First Republic Bank and Business First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Business First Bancshares 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 Business First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Business First Bancshares has no effect on the direction of First Republic i.e., First Republic and Business First go up and down completely randomly.

Pair Corralation between First Republic and Business First

If you would invest  2,700  in Business First Bancshares on August 31, 2024 and sell it today you would earn a total of  172.00  from holding Business First Bancshares or generate 6.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

First Republic Bank  vs.  Business First Bancshares

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 forward indicators, First Republic is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Business First Bancshares

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Business First Bancshares are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Business First unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Republic and Business First

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

The idea behind First Republic Bank and Business First 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.