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
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between REPUBLIC and GHANA is 0.86. 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 4.06 times more return on investment than GHANA MERCIAL. However, REPUBLIC BANK is 4.06 times more volatile than GHANA MERCIAL BANK. It trades about 0.18 of its potential returns per unit of risk. GHANA MERCIAL BANK is currently generating about 0.23 per unit of risk. 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 |
REPUBLIC BANK LIMITED vs. GHANA MERCIAL BANK
Performance |
| Timeline |
| REPUBLIC BANK LIMITED |
| GHANA MERCIAL BANK |
REPUBLIC BANK and GHANA MERCIAL Volatility Contrast
Predicted Return Density |
| Returns |
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.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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