Correlation Between Parke Bancorp and Northrim BanCorp
Can any of the company-specific risk be diversified away by investing in both Parke Bancorp and Northrim 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 Parke Bancorp and Northrim BanCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parke Bancorp and Northrim BanCorp, you can compare the effects of market volatilities on Parke Bancorp and Northrim 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 Parke Bancorp with a short position of Northrim BanCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parke Bancorp and Northrim BanCorp.
Diversification Opportunities for Parke Bancorp and Northrim BanCorp
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Parke and Northrim is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Parke Bancorp and Northrim BanCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrim 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 Northrim BanCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northrim BanCorp has no effect on the direction of Parke Bancorp i.e., Parke Bancorp and Northrim BanCorp go up and down completely randomly.
Pair Corralation between Parke Bancorp and Northrim BanCorp
Given the investment horizon of 90 days Parke Bancorp is expected to generate 4.35 times less return on investment than Northrim BanCorp. But when comparing it to its historical volatility, Parke Bancorp is 1.15 times less risky than Northrim BanCorp. It trades about 0.02 of its potential returns per unit of risk. Northrim BanCorp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,818 in Northrim BanCorp on November 9, 2024 and sell it today you would earn a total of 4,236 from holding Northrim BanCorp or generate 87.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Parke Bancorp vs. Northrim BanCorp
Performance |
| Timeline |
| Parke Bancorp |
| Northrim BanCorp |
Parke Bancorp and Northrim BanCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Parke Bancorp and Northrim BanCorp
The main advantage of trading using opposite Parke Bancorp and Northrim BanCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parke Bancorp position performs unexpectedly, Northrim 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 Northrim BanCorp will offset losses from the drop in Northrim BanCorp'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 |
| Northrim BanCorp vs. Peoples Bancorp | Northrim BanCorp vs. Eagle Bancorp | Northrim BanCorp vs. United Bankshares | Northrim BanCorp vs. Pacific Premier Bancorp |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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