Correlation Between IM CoLtd and Parksystems Corp

Can any of the company-specific risk be diversified away by investing in both IM CoLtd and Parksystems Corp 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 IM CoLtd and Parksystems Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for IM CoLtd and Parksystems Corp

0.05

Correlation Coefficient

IM CoLtd  Parksystems Corp

Significant diversification

The 3 months correlation between 101390 and Parksystems is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding IM CoLtd and Parksystems Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parksystems Corp and IM CoLtd 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 IM CoLtd are associated (or correlated) with Parksystems Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parksystems Corp has no effect on the direction of IM CoLtd i.e., IM CoLtd and Parksystems Corp go up and down completely randomly.

Pair Corralation between IM CoLtd and Parksystems Corp

Assuming the 90 days trading horizon IM CoLtd is expected to under-perform the Parksystems Corp. But the stock apears to be less risky and, when comparing its historical volatility, IM CoLtd is 1.34 times less risky than Parksystems Corp. The stock trades about -0.25 of its potential returns per unit of risk. The Parksystems Corp is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  21,700,000  in Parksystems Corp on September 3, 2024 and sell it today you would lose (1,400,000) from holding Parksystems Corp or give up 6.45% of portfolio value over 90 days.

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

IM CoLtd  vs.  Parksystems Corp

IM CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IM CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Parksystems Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Parksystems Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Parksystems Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IM CoLtd and Parksystems Corp

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

The idea behind IM CoLtd and Parksystems Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.