Correlation Between Parke Bancorp and Home Federal
Can any of the company-specific risk be diversified away by investing in both Parke Bancorp and Home Federal 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 Parke Bancorp and Home Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parke Bancorp and Home Federal Bancorp, you can compare the effects of market volatilities on Parke Bancorp and Home Federal 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 Parke Bancorp with a short position of Home Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parke Bancorp and Home Federal.
Diversification Opportunities for Parke Bancorp and Home Federal
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Parke and Home is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Parke Bancorp and Home Federal Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Federal Bancorp and Parke 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 Parke Bancorp are associated (or correlated) with Home Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Federal Bancorp has no effect on the direction of Parke Bancorp i.e., Parke Bancorp and Home Federal go up and down completely randomly.
Pair Corralation between Parke Bancorp and Home Federal
Given the investment horizon of 90 days Parke Bancorp is expected to under-perform the Home Federal. But the stock apears to be less risky and, when comparing its historical volatility, Parke Bancorp is 1.77 times less risky than Home Federal. The stock trades about -0.48 of its potential returns per unit of risk. The Home Federal Bancorp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,240 in Home Federal Bancorp on October 7, 2024 and sell it today you would earn a total of 34.00 from holding Home Federal Bancorp or generate 2.74% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 95.0% |
Values | Daily Returns |
Parke Bancorp vs. Home Federal Bancorp
Performance |
Timeline |
Parke Bancorp |
Home Federal Bancorp |
Parke Bancorp and Home Federal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Parke Bancorp and Home Federal
The main advantage of trading using opposite Parke Bancorp and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parke Bancorp position performs unexpectedly, Home Federal 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 Home Federal will offset losses from the drop in Home Federal's long position.Parke Bancorp vs. Sound Financial Bancorp | Parke Bancorp vs. Finward Bancorp | Parke Bancorp vs. Franklin Financial Services | Parke Bancorp vs. Community West Bancshares |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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