Correlation Between GHANA MERCIAL and REPUBLIC BANK
Can any of the company-specific risk be diversified away by investing in both GHANA MERCIAL 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 GHANA MERCIAL and REPUBLIC BANK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GHANA MERCIAL BANK and REPUBLIC BANK LIMITED, you can compare the effects of market volatilities on GHANA MERCIAL 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 GHANA MERCIAL with a short position of REPUBLIC BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of GHANA MERCIAL and REPUBLIC BANK.
Diversification Opportunities for GHANA MERCIAL and REPUBLIC BANK
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GHANA and REPUBLIC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding GHANA MERCIAL BANK 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 GHANA MERCIAL 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 GHANA MERCIAL BANK 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 GHANA MERCIAL i.e., GHANA MERCIAL and REPUBLIC BANK go up and down completely randomly.
Pair Corralation between GHANA MERCIAL and REPUBLIC BANK
Assuming the 90 days trading horizon GHANA MERCIAL is expected to generate 3.04 times less return on investment than REPUBLIC BANK. But when comparing it to its historical volatility, GHANA MERCIAL BANK is 4.06 times less risky than REPUBLIC BANK. It trades about 0.23 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 2, 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GHANA MERCIAL BANK vs. REPUBLIC BANK LIMITED
Performance |
| Timeline |
| GHANA MERCIAL BANK |
| REPUBLIC BANK LIMITED |
GHANA MERCIAL and REPUBLIC BANK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GHANA MERCIAL and REPUBLIC BANK
The main advantage of trading using opposite GHANA MERCIAL and REPUBLIC BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GHANA MERCIAL 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 GHANA MERCIAL BANK 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.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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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