Correlation Between CPI Aerostructures and Park Electrochemical

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

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

Diversification Opportunities for CPI Aerostructures and Park Electrochemical

0.74

Correlation Coefficient

CPI Aerostructures  Park Electrochemical

Poor diversification

The 3 months correlation between CPI and Park is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding CPI Aerostructures and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical and CPI Aerostructures 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 CPI Aerostructures 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 CPI Aerostructures i.e., CPI Aerostructures and Park Electrochemical go up and down completely randomly.

Pair Corralation between CPI Aerostructures and Park Electrochemical

Considering the 90-day investment horizon CPI Aerostructures is expected to under-perform the Park Electrochemical. In addition to that, CPI Aerostructures is 2.64 times more volatile than Park Electrochemical. It trades about -0.03 of its total potential returns per unit of risk. Park Electrochemical is currently generating about -0.05 per unit of volatility. If you would invest  1,476  in Park Electrochemical on December 26, 2024 and sell it today you would lose (83.00) from holding Park Electrochemical or give up 5.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

CPI Aerostructures  vs.  Park Electrochemical

CPI Aerostructures

Risk-Adjusted Performance

Very Weak

Over the last 90 days CPI Aerostructures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 CPI Aerostructures and Park Electrochemical

The main advantage of trading using opposite CPI Aerostructures and Park Electrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CPI Aerostructures 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 CPI Aerostructures 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.