Correlation Between Evonik Industries and Park Lawn

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

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

Diversification Opportunities for Evonik Industries and Park Lawn

-0.84

Correlation Coefficient

Evonik Industries  Park Lawn

Pay attention - limited upside

The 3 months correlation between Evonik and Park is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Evonik Industries AG and Park Lawn in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Lawn and Evonik Industries 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 Evonik Industries 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 Evonik Industries i.e., Evonik Industries and Park Lawn go up and down completely randomly.

Pair Corralation between Evonik Industries and Park Lawn

Assuming the 90 days horizon Evonik Industries is expected to generate 19.8 times less return on investment than Park Lawn. But when comparing it to its historical volatility, Evonik Industries AG is 2.16 times less risky than Park Lawn. It trades about 0.01 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	Significant
Accuracy	53.16%
Values	Daily Returns

Evonik Industries AG  vs.  Park Lawn

Evonik Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evonik Industries AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company 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 Evonik Industries and Park Lawn

The main advantage of trading using opposite Evonik Industries and Park Lawn positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evonik Industries 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 Evonik Industries 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.

Check out your portfolio center.

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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.