Correlation Between Parade Technologies and Center Laboratories

Can any of the company-specific risk be diversified away by investing in both Parade Technologies and Center Laboratories 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 Parade Technologies and Center Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Parade Technologies and Center Laboratories

-0.53

Correlation Coefficient

Parade Technologies  Center Laboratories

Excellent diversification

The 3 months correlation between Parade and Center is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Parade Technologies and Center Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Center Laboratories and Parade Technologies 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 Parade Technologies are associated (or correlated) with Center Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Center Laboratories has no effect on the direction of Parade Technologies i.e., Parade Technologies and Center Laboratories go up and down completely randomly.

Pair Corralation between Parade Technologies and Center Laboratories

Assuming the 90 days trading horizon Parade Technologies is expected to generate 1.27 times more return on investment than Center Laboratories. However, Parade Technologies is 1.27 times more volatile than Center Laboratories. It trades about -0.03 of its potential returns per unit of risk. Center Laboratories is currently generating about -0.2 per unit of risk. If you would invest  75,600  in Parade Technologies on October 24, 2024 and sell it today you would lose (4,700) from holding Parade Technologies or give up 6.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Parade Technologies  vs.  Center Laboratories

Parade Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Parade Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Parade Technologies is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Center Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Center Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Parade Technologies and Center Laboratories

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

The idea behind Parade Technologies and Center Laboratories 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.