Correlation Between Park Electrochemical and Innovative Solutions

Can any of the company-specific risk be diversified away by investing in both Park Electrochemical and Innovative Solutions 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 Park Electrochemical and Innovative Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Park Electrochemical and Innovative Solutions

0.89

Correlation Coefficient

Park Electrochemical  Innovative Solutions

Very poor diversification

The 3 months correlation between Park and Innovative is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Park Electrochemical and Innovative Solutions and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Solutions and and Park Electrochemical 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 Park Electrochemical are associated (or correlated) with Innovative Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Solutions and has no effect on the direction of Park Electrochemical i.e., Park Electrochemical and Innovative Solutions go up and down completely randomly.

Pair Corralation between Park Electrochemical and Innovative Solutions

Considering the 90-day investment horizon Park Electrochemical is expected to generate 1.07 times more return on investment than Innovative Solutions. However, Park Electrochemical is 1.07 times more volatile than Innovative Solutions and. It trades about 0.12 of its potential returns per unit of risk. Innovative Solutions and is currently generating about 0.09 per unit of risk. If you would invest  1,326  in Park Electrochemical on August 31, 2024 and sell it today you would earn a total of  199.00  from holding Park Electrochemical or generate 15.01% return on investment over 90 days.

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

Park Electrochemical  vs.  Innovative Solutions and

Park Electrochemical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Park Electrochemical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, Park Electrochemical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Innovative Solutions and

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovative Solutions and are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Innovative Solutions may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Park Electrochemical and Innovative Solutions

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

The idea behind Park Electrochemical and Innovative Solutions and 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.