Correlation Between REPUBLIC BANK and GHANA MERCIAL

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

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

Diversification Opportunities for REPUBLIC BANK and GHANA MERCIAL

0.84

Correlation Coefficient

REPUBLIC BANK  GHANA MERCIAL

Very poor diversification

The 3 months correlation between REPUBLIC and GHANA is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding REPUBLIC BANK LIMITED and GHANA MERCIAL BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GHANA MERCIAL BANK and REPUBLIC BANK 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 BANK LIMITED are associated (or correlated) with GHANA MERCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GHANA MERCIAL BANK has no effect on the direction of REPUBLIC BANK i.e., REPUBLIC BANK and GHANA MERCIAL go up and down completely randomly.

Pair Corralation between REPUBLIC BANK and GHANA MERCIAL

Assuming the 90 days trading horizon REPUBLIC BANK LIMITED is expected to generate 2.96 times more return on investment than GHANA MERCIAL. However, REPUBLIC BANK is 2.96 times more volatile than GHANA MERCIAL BANK. It trades about 0.13 of its potential returns per unit of risk. GHANA MERCIAL BANK is currently generating about 0.26 per unit of risk. If you would invest  60.00  in REPUBLIC BANK LIMITED on September 14, 2024 and sell it today you would earn a total of  6.00  from holding REPUBLIC BANK LIMITED or generate 10.0% return on investment over 90 days.

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

REPUBLIC BANK LIMITED  vs.  GHANA MERCIAL BANK

REPUBLIC BANK LIMITED

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in REPUBLIC BANK LIMITED are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, REPUBLIC BANK may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GHANA MERCIAL BANK

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GHANA MERCIAL BANK are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, GHANA MERCIAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with REPUBLIC BANK and GHANA MERCIAL

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

The idea behind REPUBLIC BANK LIMITED and GHANA MERCIAL BANK 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.