Correlation Between Covestro and Park Lawn

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

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

Diversification Opportunities for Covestro and Park Lawn

-0.44

Correlation Coefficient

Covestro  Park Lawn

Very good diversification

The 3 months correlation between Covestro and Park is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Covestro AG and Park Lawn in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Lawn and Covestro 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 Covestro AG are associated (or correlated) with Park Lawn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Lawn has no effect on the direction of Covestro i.e., Covestro and Park Lawn go up and down completely randomly.

Pair Corralation between Covestro and Park Lawn

Assuming the 90 days horizon Covestro is expected to generate 7.62 times less return on investment than Park Lawn. But when comparing it to its historical volatility, Covestro AG is 3.35 times less risky than Park Lawn. It trades about 0.06 of its potential returns per unit of risk. Park Lawn is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,154  in Park Lawn on October 12, 2024 and sell it today you would earn a total of  769.00  from holding Park Lawn or generate 66.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	44.44%
Values	Daily Returns

Covestro AG  vs.  Park Lawn

Covestro AG

Risk-Adjusted Performance

0 of 100

Very Weak

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

Park Lawn

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Covestro and Park Lawn

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

The idea behind Covestro AG and Park Lawn 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.