Correlation Between Embassy Bancorp and Parkway Acquisition

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

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

Diversification Opportunities for Embassy Bancorp and Parkway Acquisition

0.0

Correlation Coefficient

Embassy Bancorp  Parkway Acquisition

Pay attention - limited upside

The 3 months correlation between Embassy and Parkway is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Embassy Bancorp and Parkway Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parkway Acquisition Corp and Embassy Bancorp 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 Embassy Bancorp are associated (or correlated) with Parkway Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parkway Acquisition Corp has no effect on the direction of Embassy Bancorp i.e., Embassy Bancorp and Parkway Acquisition go up and down completely randomly.

Pair Corralation between Embassy Bancorp and Parkway Acquisition

If you would invest (100.00) in Parkway Acquisition Corp on December 5, 2024 and sell it today you would earn a total of  100.00  from holding Parkway Acquisition Corp or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Embassy Bancorp  vs.  Parkway Acquisition Corp

Embassy Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Embassy Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Embassy Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Parkway Acquisition Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parkway Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward-looking signals, Parkway Acquisition is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Embassy Bancorp and Parkway Acquisition

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

The idea behind Embassy Bancorp and Parkway Acquisition Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.