Correlation Between Park Ohio and Leonardo Spa

Can any of the company-specific risk be diversified away by investing in both Park Ohio and Leonardo Spa 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 Leonardo Spa 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 Leonardo Spa, you can compare the effects of market volatilities on Park Ohio and Leonardo Spa 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 Leonardo Spa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Park Ohio and Leonardo Spa.

Diversification Opportunities for Park Ohio and Leonardo Spa

0.78

Correlation Coefficient

Park Ohio  Leonardo Spa

Poor diversification

The 3 months correlation between Park and Leonardo is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Park Ohio Holdings and Leonardo Spa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leonardo Spa 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 Leonardo Spa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leonardo Spa has no effect on the direction of Park Ohio i.e., Park Ohio and Leonardo Spa go up and down completely randomly.

Pair Corralation between Park Ohio and Leonardo Spa

Given the investment horizon of 90 days Park Ohio Holdings is expected to under-perform the Leonardo Spa. But the stock apears to be less risky and, when comparing its historical volatility, Park Ohio Holdings is 2.98 times less risky than Leonardo Spa. The stock trades about -0.22 of its potential returns per unit of risk. The Leonardo Spa is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,616  in Leonardo Spa on September 14, 2024 and sell it today you would earn a total of  163.00  from holding Leonardo Spa or generate 6.23% 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.  Leonardo Spa

Park Ohio Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Park Ohio Holdings are ranked lower than 4 (%) 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.

Leonardo Spa

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leonardo Spa are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Leonardo Spa reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Park Ohio and Leonardo Spa

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

The idea behind Park Ohio Holdings and Leonardo Spa 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..