Correlation Between MTN GHANA and REPUBLIC BANK

Can any of the company-specific risk be diversified away by investing in both MTN GHANA and REPUBLIC BANK 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 MTN GHANA and REPUBLIC BANK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MTN GHANA LTD and REPUBLIC BANK LIMITED, you can compare the effects of market volatilities on MTN GHANA and REPUBLIC BANK 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 MTN GHANA with a short position of REPUBLIC BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTN GHANA and REPUBLIC BANK.

Diversification Opportunities for MTN GHANA and REPUBLIC BANK

0.62

Correlation Coefficient

MTN GHANA  REPUBLIC BANK

Poor diversification

The 3 months correlation between MTN and REPUBLIC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding MTN GHANA LTD and REPUBLIC BANK LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REPUBLIC BANK LIMITED and MTN GHANA 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 MTN GHANA LTD are associated (or correlated) with REPUBLIC BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REPUBLIC BANK LIMITED has no effect on the direction of MTN GHANA i.e., MTN GHANA and REPUBLIC BANK go up and down completely randomly.

Pair Corralation between MTN GHANA and REPUBLIC BANK

Assuming the 90 days trading horizon MTN GHANA is expected to generate 2.42 times less return on investment than REPUBLIC BANK. But when comparing it to its historical volatility, MTN GHANA LTD is 1.42 times less risky than REPUBLIC BANK. It trades about 0.1 of its potential returns per unit of risk. REPUBLIC BANK LIMITED is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  55.00  in REPUBLIC BANK LIMITED on September 12, 2024 and sell it today you would earn a total of  11.00  from holding REPUBLIC BANK LIMITED or generate 20.0% return on investment over 90 days.

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

MTN GHANA LTD  vs.  REPUBLIC BANK LIMITED

MTN GHANA LTD

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MTN GHANA LTD are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, MTN GHANA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

REPUBLIC BANK LIMITED

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in REPUBLIC BANK LIMITED are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, REPUBLIC BANK unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MTN GHANA and REPUBLIC BANK

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

The idea behind MTN GHANA LTD and REPUBLIC BANK LIMITED 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.