Correlation Between Park Electrochemical and Boeing

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

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

Diversification Opportunities for Park Electrochemical and Boeing

0.1

Correlation Coefficient

Park Electrochemical  Boeing

Average diversification

The 3 months correlation between Park and Boeing is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Park Electrochemical and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and Park Electrochemical 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 Electrochemical are associated (or correlated) with Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of Park Electrochemical i.e., Park Electrochemical and Boeing go up and down completely randomly.

Pair Corralation between Park Electrochemical and Boeing

Considering the 90-day investment horizon Park Electrochemical is expected to under-perform the Boeing. In addition to that, Park Electrochemical is 1.09 times more volatile than The Boeing. It trades about -0.19 of its total potential returns per unit of risk. The Boeing is currently generating about 0.54 per unit of volatility. If you would invest  14,929  in The Boeing on September 23, 2024 and sell it today you would earn a total of  2,806  from holding The Boeing or generate 18.8% return on investment over 90 days.

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

Park Electrochemical  vs.  The Boeing

Park Electrochemical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Park Electrochemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal forward-looking signals, Park Electrochemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Boeing

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Park Electrochemical and Boeing

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

The idea behind Park Electrochemical and The Boeing 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.