Correlation Between EastGroup Properties and Park Electrochemical

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

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

Diversification Opportunities for EastGroup Properties and Park Electrochemical

-0.5

Correlation Coefficient

EastGroup Properties  Park Electrochemical

Very good diversification

The 3 months correlation between EastGroup and Park is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding EastGroup Properties and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical and EastGroup Properties 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 EastGroup Properties 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 EastGroup Properties i.e., EastGroup Properties and Park Electrochemical go up and down completely randomly.

Pair Corralation between EastGroup Properties and Park Electrochemical

Considering the 90-day investment horizon EastGroup Properties is expected to generate 0.8 times more return on investment than Park Electrochemical. However, EastGroup Properties is 1.25 times less risky than Park Electrochemical. It trades about 0.18 of its potential returns per unit of risk. Park Electrochemical is currently generating about -0.03 per unit of risk. If you would invest  15,736  in EastGroup Properties on December 19, 2024 and sell it today you would earn a total of  2,226  from holding EastGroup Properties or generate 14.15% return on investment over 90 days.

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

EastGroup Properties  vs.  Park Electrochemical

EastGroup Properties

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EastGroup Properties are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, EastGroup Properties reported solid returns over the last few months and may actually be approaching a breakup point.

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 EastGroup Properties and Park Electrochemical

The main advantage of trading using opposite EastGroup Properties and Park Electrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EastGroup Properties 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 EastGroup Properties 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.