Correlation Between Lilium NV and Park Electrochemical

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

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

Diversification Opportunities for Lilium NV and Park Electrochemical

-0.47

Correlation Coefficient

Lilium NV  Park Electrochemical

Very good diversification

The 3 months correlation between Lilium and Park is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lilium NV and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical and Lilium NV 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 Lilium NV 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 Lilium NV i.e., Lilium NV and Park Electrochemical go up and down completely randomly.

Pair Corralation between Lilium NV and Park Electrochemical

Given the investment horizon of 90 days Lilium NV is expected to generate 34.94 times more return on investment than Park Electrochemical. However, Lilium NV is 34.94 times more volatile than Park Electrochemical. It trades about 0.22 of its potential returns per unit of risk. Park Electrochemical is currently generating about -0.17 per unit of risk. If you would invest  10.00  in Lilium NV on October 5, 2024 and sell it today you would earn a total of  12.00  from holding Lilium NV or generate 120.0% return on investment over 90 days.

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

Lilium NV  vs.  Park Electrochemical

Lilium NV

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lilium NV are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting essential indicators, Lilium NV displayed solid returns over the last few months and may actually be approaching a breakup point.

Park Electrochemical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Park Electrochemical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, Park Electrochemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lilium NV and Park Electrochemical

The main advantage of trading using opposite Lilium NV and Park Electrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lilium NV 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 Lilium NV 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .