Correlation Between Obayashi and Republic Bancorp

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

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

Diversification Opportunities for Obayashi and Republic Bancorp

0.66

Correlation Coefficient

Obayashi  Republic Bancorp

Poor diversification

The 3 months correlation between Obayashi and Republic is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Obayashi and Republic Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Republic Bancorp and Obayashi 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 Obayashi 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 Obayashi i.e., Obayashi and Republic Bancorp go up and down completely randomly.

Pair Corralation between Obayashi and Republic Bancorp

Assuming the 90 days horizon Obayashi is expected to generate 1.1 times less return on investment than Republic Bancorp. But when comparing it to its historical volatility, Obayashi is 1.23 times less risky than Republic Bancorp. It trades about 0.08 of its potential returns per unit of risk. Republic Bancorp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,854  in Republic Bancorp on September 24, 2024 and sell it today you would earn a total of  3,317  from holding Republic Bancorp or generate 86.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Obayashi  vs.  Republic Bancorp

Obayashi

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Obayashi are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, Obayashi reported solid returns over the last few months and may actually be approaching a breakup point.

Republic Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Republic Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Republic Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Obayashi and Republic Bancorp

The main advantage of trading using opposite Obayashi and Republic Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Obayashi 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 Obayashi 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.