Correlation Between Home Federal and Parke Bancorp

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

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

Diversification Opportunities for Home Federal and Parke Bancorp

-0.43

Correlation Coefficient

Home Federal  Parke Bancorp

Very good diversification

The 3 months correlation between Home and Parke is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Parke Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parke Bancorp and Home Federal 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 Home Federal Bancorp 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 Home Federal i.e., Home Federal and Parke Bancorp go up and down completely randomly.

Pair Corralation between Home Federal and Parke Bancorp

Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 1.88 times more return on investment than Parke Bancorp. However, Home Federal is 1.88 times more volatile than Parke Bancorp. It trades about -0.01 of its potential returns per unit of risk. Parke Bancorp is currently generating about -0.15 per unit of risk. If you would invest  1,276  in Home Federal Bancorp on December 20, 2024 and sell it today you would lose (32.00) from holding Home Federal Bancorp or give up 2.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	77.97%
Values	Daily Returns

Home Federal Bancorp  vs.  Parke Bancorp

Home Federal Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Home Federal Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Home Federal is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Parke Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parke Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Home Federal and Parke Bancorp

The main advantage of trading using opposite Home Federal and Parke Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal 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 Home Federal Bancorp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.