Correlation Between Consolidated Water and Parke Bancorp

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

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

Diversification Opportunities for Consolidated Water and Parke Bancorp

0.61

Correlation Coefficient

Consolidated Water  Parke Bancorp

Poor diversification

The 3 months correlation between Consolidated and Parke is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Water Co and Parke Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parke Bancorp and Consolidated Water 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 Consolidated Water Co are associated (or correlated) with Parke Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parke Bancorp has no effect on the direction of Consolidated Water i.e., Consolidated Water and Parke Bancorp go up and down completely randomly.

Pair Corralation between Consolidated Water and Parke Bancorp

Given the investment horizon of 90 days Consolidated Water Co is expected to generate 1.3 times more return on investment than Parke Bancorp. However, Consolidated Water is 1.3 times more volatile than Parke Bancorp. It trades about -0.15 of its potential returns per unit of risk. Parke Bancorp is currently generating about -0.42 per unit of risk. If you would invest  2,685  in Consolidated Water Co on September 26, 2024 and sell it today you would lose (148.00) from holding Consolidated Water Co or give up 5.51% of portfolio value over 90 days.

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

Consolidated Water Co  vs.  Parke Bancorp

Consolidated Water

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Water Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Consolidated Water is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Parke Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Parke Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Parke Bancorp is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Consolidated Water and Parke Bancorp

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

The idea behind Consolidated Water Co and Parke Bancorp 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.