Correlation Between MYT Netherlands and Park Electrochemical

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

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

Diversification Opportunities for MYT Netherlands and Park Electrochemical

0.05

Correlation Coefficient

MYT Netherlands  Park Electrochemical

Significant diversification

The 3 months correlation between MYT and Park is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding MYT Netherlands Parent and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical and MYT Netherlands 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 MYT Netherlands Parent 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 MYT Netherlands i.e., MYT Netherlands and Park Electrochemical go up and down completely randomly.

Pair Corralation between MYT Netherlands and Park Electrochemical

Given the investment horizon of 90 days MYT Netherlands Parent is expected to generate 2.14 times more return on investment than Park Electrochemical. However, MYT Netherlands is 2.14 times more volatile than Park Electrochemical. It trades about 0.15 of its potential returns per unit of risk. Park Electrochemical is currently generating about 0.04 per unit of risk. If you would invest  683.00  in MYT Netherlands Parent on October 24, 2024 and sell it today you would earn a total of  279.00  from holding MYT Netherlands Parent or generate 40.85% return on investment over 90 days.

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

MYT Netherlands Parent  vs.  Park Electrochemical

MYT Netherlands Parent

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MYT Netherlands Parent are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, MYT Netherlands exhibited solid returns over the last few months and may actually be approaching a breakup point.

Park Electrochemical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Park Electrochemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 MYT Netherlands and Park Electrochemical

The main advantage of trading using opposite MYT Netherlands and Park Electrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MYT Netherlands 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 MYT Netherlands Parent 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.