Correlation Between Park Aerospace and Raytheon Technologies

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

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

Diversification Opportunities for Park Aerospace and Raytheon Technologies

0.45

Correlation Coefficient

Park Aerospace  Raytheon Technologies

Very weak diversification

The 3 months correlation between Park and Raytheon is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Park Aerospace Corp and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies and Park Aerospace 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 Park Aerospace Corp are associated (or correlated) with Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Park Aerospace i.e., Park Aerospace and Raytheon Technologies go up and down completely randomly.

Pair Corralation between Park Aerospace and Raytheon Technologies

Assuming the 90 days horizon Park Aerospace Corp is expected to under-perform the Raytheon Technologies. In addition to that, Park Aerospace is 1.36 times more volatile than Raytheon Technologies Corp. It trades about -0.18 of its total potential returns per unit of risk. Raytheon Technologies Corp is currently generating about -0.11 per unit of volatility. If you would invest  11,504  in Raytheon Technologies Corp on September 28, 2024 and sell it today you would lose (350.00) from holding Raytheon Technologies Corp or give up 3.04% of portfolio value over 90 days.

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

Park Aerospace Corp  vs.  Raytheon Technologies Corp

Park Aerospace Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Park Aerospace Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Park Aerospace reported solid returns over the last few months and may actually be approaching a breakup point.

Raytheon Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Raytheon Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Park Aerospace and Raytheon Technologies

The main advantage of trading using opposite Park Aerospace and Raytheon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Aerospace position performs unexpectedly, Raytheon Technologies 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 Raytheon Technologies will offset losses from the drop in Raytheon Technologies' long position.

The idea behind Park Aerospace Corp and Raytheon Technologies Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.