Correlation Between Parke Bancorp and BankFinancial
Can any of the company-specific risk be diversified away by investing in both Parke Bancorp and BankFinancial 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 BankFinancial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parke Bancorp and BankFinancial, you can compare the effects of market volatilities on Parke Bancorp and BankFinancial 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 BankFinancial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parke Bancorp and BankFinancial.
Diversification Opportunities for Parke Bancorp and BankFinancial
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Parke and BankFinancial is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Parke Bancorp and BankFinancial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankFinancial 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 BankFinancial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankFinancial has no effect on the direction of Parke Bancorp i.e., Parke Bancorp and BankFinancial go up and down completely randomly.
Pair Corralation between Parke Bancorp and BankFinancial
Given the investment horizon of 90 days Parke Bancorp is expected to under-perform the BankFinancial. But the stock apears to be less risky and, when comparing its historical volatility, Parke Bancorp is 1.18 times less risky than BankFinancial. The stock trades about -0.13 of its potential returns per unit of risk. The BankFinancial is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,250 in BankFinancial on October 22, 2024 and sell it today you would lose (12.00) from holding BankFinancial or give up 0.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Parke Bancorp vs. BankFinancial
Performance |
| Timeline |
| Parke Bancorp |
| BankFinancial |
Parke Bancorp and BankFinancial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Parke Bancorp and BankFinancial
The main advantage of trading using opposite Parke Bancorp and BankFinancial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parke Bancorp position performs unexpectedly, BankFinancial 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 BankFinancial will offset losses from the drop in BankFinancial'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 |
| BankFinancial vs. First Business Financial | BankFinancial vs. Old Point Financial | BankFinancial vs. Parke Bancorp | BankFinancial 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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