Correlation Between Signature Bank and First Republic
Can any of the company-specific risk be diversified away by investing in both Signature Bank and First Republic 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 Signature Bank and First Republic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Signature Bank and First Republic Bank, you can compare the effects of market volatilities on Signature Bank and First Republic 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 Signature Bank with a short position of First Republic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Signature Bank and First Republic.
Diversification Opportunities for Signature Bank and First Republic
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Signature and First is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Signature Bank and First Republic Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Republic Bank and Signature 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 Signature Bank are associated (or correlated) with First Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Republic Bank has no effect on the direction of Signature Bank i.e., Signature Bank and First Republic go up and down completely randomly.
Pair Corralation between Signature Bank and First Republic
Assuming the 90 days horizon Signature Bank is expected to generate 2.7 times more return on investment than First Republic. However, Signature Bank is 2.7 times more volatile than First Republic Bank. It trades about 0.23 of its potential returns per unit of risk. First Republic Bank is currently generating about 0.04 per unit of risk. If you would invest 2.50 in Signature Bank on August 29, 2024 and sell it today you would lose (0.80) from holding Signature Bank or give up 32.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.11% |
| Values | Daily Returns |
Signature Bank vs. First Republic Bank
Performance |
| Timeline |
| Signature Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| First Republic Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Signature Bank and First Republic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Signature Bank and First Republic
The main advantage of trading using opposite Signature Bank and First Republic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Signature Bank position performs unexpectedly, First Republic 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 First Republic will offset losses from the drop in First Republic's long position.| Signature Bank vs. Braskem SA Class | Signature Bank vs. Organic Sales and | Signature Bank vs. Ecolab Inc | Signature Bank vs. The Mosaic |
| First Republic vs. Old Dominion Freight | First Republic vs. Portillos | First Republic vs. Afya | First Republic vs. Park Hotels Resorts |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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