Correlation Between Awilco Drilling and Park Electrochemical

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

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

Diversification Opportunities for Awilco Drilling and Park Electrochemical

0.32

Correlation Coefficient

Awilco Drilling  Park Electrochemical

Weak diversification

The 3 months correlation between Awilco and Park is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Awilco Drilling PLC and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical and Awilco Drilling 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 Awilco Drilling PLC are associated (or correlated) with Park Electrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Electrochemical has no effect on the direction of Awilco Drilling i.e., Awilco Drilling and Park Electrochemical go up and down completely randomly.

Pair Corralation between Awilco Drilling and Park Electrochemical

Assuming the 90 days horizon Awilco Drilling PLC is expected to under-perform the Park Electrochemical. But the otc stock apears to be less risky and, when comparing its historical volatility, Awilco Drilling PLC is 2.3 times less risky than Park Electrochemical. The otc stock trades about -0.13 of its potential returns per unit of risk. The Park Electrochemical is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,395  in Park Electrochemical on December 20, 2024 and sell it today you would lose (1.00) from holding Park Electrochemical or give up 0.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Awilco Drilling PLC  vs.  Park Electrochemical

Awilco Drilling PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Awilco Drilling PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Awilco Drilling is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Park Electrochemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Park Electrochemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Park Electrochemical is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Awilco Drilling and Park Electrochemical

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

The idea behind Awilco Drilling PLC and Park Electrochemical 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.