Correlation Between Park Electrochemical and Lead Real

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

By analyzing existing cross correlation between Park Electrochemical and Lead Real Estate, you can compare the effects of market volatilities on Park Electrochemical and Lead Real 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 Lead Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Park Electrochemical and Lead Real.

Diversification Opportunities for Park Electrochemical and Lead Real

0.76

Correlation Coefficient

Park Electrochemical  Lead Real

Poor diversification

The 3 months correlation between Park and Lead is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Park Electrochemical and Lead Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lead Real Estate 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 Lead Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lead Real Estate has no effect on the direction of Park Electrochemical i.e., Park Electrochemical and Lead Real go up and down completely randomly.

Pair Corralation between Park Electrochemical and Lead Real

Considering the 90-day investment horizon Park Electrochemical is expected to generate 5.97 times less return on investment than Lead Real. But when comparing it to its historical volatility, Park Electrochemical is 3.27 times less risky than Lead Real. It trades about 0.06 of its potential returns per unit of risk. Lead Real Estate is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  135.00  in Lead Real Estate on September 22, 2024 and sell it today you would earn a total of  63.00  from holding Lead Real Estate or generate 46.67% return on investment over 90 days.

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

Park Electrochemical  vs.  Lead Real Estate

Park Electrochemical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Park Electrochemical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, Park Electrochemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lead Real Estate

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lead Real Estate are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Lead Real exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Park Electrochemical and Lead Real

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

The idea behind Park Electrochemical and Lead Real Estate 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.