Correlation Between Park Ohio and First Horizon

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

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

Diversification Opportunities for Park Ohio and First Horizon

0.6

Correlation Coefficient

Park Ohio  First Horizon

Poor diversification

The 3 months correlation between Park and First is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Park Ohio Holdings and First Horizon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Horizon and Park Ohio 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 Ohio Holdings are associated (or correlated) with First Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Horizon has no effect on the direction of Park Ohio i.e., Park Ohio and First Horizon go up and down completely randomly.

Pair Corralation between Park Ohio and First Horizon

Given the investment horizon of 90 days Park Ohio Holdings is expected to generate 1.5 times more return on investment than First Horizon. However, Park Ohio is 1.5 times more volatile than First Horizon. It trades about 0.08 of its potential returns per unit of risk. First Horizon is currently generating about 0.03 per unit of risk. If you would invest  1,197  in Park Ohio Holdings on September 14, 2024 and sell it today you would earn a total of  1,778  from holding Park Ohio Holdings or generate 148.54% return on investment over 90 days.

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

Park Ohio Holdings  vs.  First Horizon

Park Ohio Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Park Ohio Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Park Ohio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Horizon

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Horizon are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Horizon is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Park Ohio and First Horizon

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

The idea behind Park Ohio Holdings and First Horizon 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.