Correlation Between Republic Bancorp and Bridgestone

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

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

Diversification Opportunities for Republic Bancorp and Bridgestone

-0.72

Correlation Coefficient

Republic Bancorp  Bridgestone

Pay attention - limited upside

The 3 months correlation between Republic and Bridgestone is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Republic Bancorp and Bridgestone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone and Republic Bancorp 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 Republic Bancorp are associated (or correlated) with Bridgestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone has no effect on the direction of Republic Bancorp i.e., Republic Bancorp and Bridgestone go up and down completely randomly.

Pair Corralation between Republic Bancorp and Bridgestone

Assuming the 90 days horizon Republic Bancorp is expected to generate 0.46 times more return on investment than Bridgestone. However, Republic Bancorp is 2.15 times less risky than Bridgestone. It trades about 0.12 of its potential returns per unit of risk. Bridgestone is currently generating about 0.02 per unit of risk. If you would invest  5,038  in Republic Bancorp on September 25, 2024 and sell it today you would earn a total of  2,048  from holding Republic Bancorp or generate 40.65% return on investment over 90 days.

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

Republic Bancorp  vs.  Bridgestone

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.

Bridgestone

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bridgestone has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Bridgestone is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Republic Bancorp and Bridgestone

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

The idea behind Republic Bancorp and Bridgestone 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.