Correlation Between Republic Bancorp and Parke Bancorp

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

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

Diversification Opportunities for Republic Bancorp and Parke Bancorp

0.98

Correlation Coefficient

Republic Bancorp  Parke Bancorp

Almost no diversification

The 3 months correlation between Republic and Parke is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Republic Bancorp and Parke Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parke Bancorp and Republic 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 Republic 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 Republic Bancorp i.e., Republic Bancorp and Parke Bancorp go up and down completely randomly.

Pair Corralation between Republic Bancorp and Parke Bancorp

Assuming the 90 days horizon Republic Bancorp is expected to generate 1.64 times more return on investment than Parke Bancorp. However, Republic Bancorp is 1.64 times more volatile than Parke Bancorp. It trades about 0.13 of its potential returns per unit of risk. Parke Bancorp is currently generating about 0.18 per unit of risk. If you would invest  6,267  in Republic Bancorp on September 3, 2024 and sell it today you would earn a total of  1,361  from holding Republic Bancorp or generate 21.72% return on investment over 90 days.

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

Republic Bancorp  vs.  Parke Bancorp

Republic Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Republic Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Republic Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.

Parke Bancorp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parke Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, Parke Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Republic Bancorp and Parke Bancorp

The main advantage of trading using opposite Republic Bancorp and Parke Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Republic Bancorp 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 Republic 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.