Correlation Between California Water and Parke Bancorp

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

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

Diversification Opportunities for California Water and Parke Bancorp

-0.36

Correlation Coefficient

California Water  Parke Bancorp

Very good diversification

The 3 months correlation between California and Parke is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding California Water Service and Parke Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parke Bancorp and California Water 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 California Water Service 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 California Water i.e., California Water and Parke Bancorp go up and down completely randomly.

Pair Corralation between California Water and Parke Bancorp

Considering the 90-day investment horizon California Water Service is expected to under-perform the Parke Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, California Water Service is 1.27 times less risky than Parke Bancorp. The stock trades about -0.16 of its potential returns per unit of risk. The Parke Bancorp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,078  in Parke Bancorp on September 25, 2024 and sell it today you would earn a total of  19.00  from holding Parke Bancorp or generate 0.91% return on investment over 90 days.

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

California Water Service  vs.  Parke Bancorp

California Water Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California Water Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Parke Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Parke Bancorp are ranked lower than 1 (%) 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.

Pair Trading with California Water and Parke Bancorp

The main advantage of trading using opposite California Water and Parke Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Water 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 California Water Service 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.