Correlation Between Southern Missouri and Parke Bancorp

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

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

Diversification Opportunities for Southern Missouri and Parke Bancorp

0.79

Correlation Coefficient

Southern Missouri  Parke Bancorp

Poor diversification

The 3 months correlation between Southern and Parke is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Southern Missouri Bancorp and Parke Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parke Bancorp and Southern Missouri 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 Southern Missouri 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 Southern Missouri i.e., Southern Missouri and Parke Bancorp go up and down completely randomly.

Pair Corralation between Southern Missouri and Parke Bancorp

Given the investment horizon of 90 days Southern Missouri Bancorp is expected to under-perform the Parke Bancorp. In addition to that, Southern Missouri is 1.25 times more volatile than Parke Bancorp. It trades about -0.09 of its total potential returns per unit of risk. Parke Bancorp is currently generating about -0.09 per unit of volatility. If you would invest  2,049  in Parke Bancorp on December 29, 2024 and sell it today you would lose (156.00) from holding Parke Bancorp or give up 7.61% of portfolio value over 90 days.

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

Southern Missouri Bancorp  vs.  Parke Bancorp

Southern Missouri Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southern Missouri Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 latest fragile performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Southern Missouri and Parke Bancorp

The main advantage of trading using opposite Southern Missouri and Parke Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Missouri 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 Southern Missouri 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.