Correlation Between Innovative Solutions and Park Electrochemical

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

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

Diversification Opportunities for Innovative Solutions and Park Electrochemical

0.89

Correlation Coefficient

Innovative Solutions  Park Electrochemical

Very poor diversification

The 3 months correlation between Innovative and Park is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Solutions and and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical and Innovative Solutions 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 Innovative Solutions and 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 Innovative Solutions i.e., Innovative Solutions and Park Electrochemical go up and down completely randomly.

Pair Corralation between Innovative Solutions and Park Electrochemical

Given the investment horizon of 90 days Innovative Solutions is expected to generate 1.32 times less return on investment than Park Electrochemical. But when comparing it to its historical volatility, Innovative Solutions and is 1.07 times less risky than Park Electrochemical. It trades about 0.09 of its potential returns per unit of risk. Park Electrochemical is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,338  in Park Electrochemical on August 30, 2024 and sell it today you would earn a total of  187.00  from holding Park Electrochemical or generate 13.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Innovative Solutions and  vs.  Park Electrochemical

Innovative Solutions and

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovative Solutions and are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Innovative Solutions may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Park Electrochemical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Park Electrochemical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward-looking signals, Park Electrochemical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innovative Solutions and Park Electrochemical

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

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 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.