Correlation Between Prosperity Bancshares and Parke Bancorp

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

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

Diversification Opportunities for Prosperity Bancshares and Parke Bancorp

0.95

Correlation Coefficient

Prosperity Bancshares  Parke Bancorp

Almost no diversification

The 3 months correlation between Prosperity and Parke is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and Parke Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parke Bancorp and Prosperity Bancshares 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 Prosperity Bancshares 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 Prosperity Bancshares i.e., Prosperity Bancshares and Parke Bancorp go up and down completely randomly.

Pair Corralation between Prosperity Bancshares and Parke Bancorp

Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to generate 1.11 times less return on investment than Parke Bancorp. But when comparing it to its historical volatility, Prosperity Bancshares is 1.33 times less risky than Parke Bancorp. It trades about 0.07 of its potential returns per unit of risk. Parke Bancorp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,631  in Parke Bancorp on August 31, 2024 and sell it today you would earn a total of  730.00  from holding Parke Bancorp or generate 44.76% return on investment over 90 days.

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

Prosperity Bancshares  vs.  Parke Bancorp

Prosperity Bancshares

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prosperity Bancshares are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, Prosperity Bancshares sustained solid returns over the last few months and may actually be approaching a breakup point.

Parke Bancorp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parke Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, Parke Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prosperity Bancshares and Parke Bancorp

The main advantage of trading using opposite Prosperity Bancshares and Parke Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosperity Bancshares 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 Prosperity Bancshares 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.