Correlation Between Parke Bancorp and Heritage Financial

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

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

Diversification Opportunities for Parke Bancorp and Heritage Financial

0.68

Correlation Coefficient

Parke Bancorp  Heritage Financial

Poor diversification

The 3 months correlation between Parke and Heritage is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Parke Bancorp and Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Financial 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 Heritage Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Financial has no effect on the direction of Parke Bancorp i.e., Parke Bancorp and Heritage Financial go up and down completely randomly.

Pair Corralation between Parke Bancorp and Heritage Financial

Given the investment horizon of 90 days Parke Bancorp is expected to generate 0.85 times more return on investment than Heritage Financial. However, Parke Bancorp is 1.18 times less risky than Heritage Financial. It trades about 0.07 of its potential returns per unit of risk. Heritage Financial is currently generating about -0.03 per unit of risk. If you would invest  1,921  in Parke Bancorp on May 6, 2025 and sell it today you would earn a total of  110.00  from holding Parke Bancorp or generate 5.73% return on investment over 90 days.

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

Parke Bancorp  vs.  Heritage Financial

Parke Bancorp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Parke Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Parke Bancorp is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Heritage Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heritage Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Heritage Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Parke Bancorp and Heritage Financial

The main advantage of trading using opposite Parke Bancorp and Heritage Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parke Bancorp position performs unexpectedly, Heritage Financial 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 Heritage Financial will offset losses from the drop in Heritage Financial's long position.

The idea behind Parke Bancorp and Heritage Financial 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.