Correlation Between Park Electrochemical and Cadre Holdings

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

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

Diversification Opportunities for Park Electrochemical and Cadre Holdings

0.6

Correlation Coefficient

Park Electrochemical  Cadre Holdings

Poor diversification

The 3 months correlation between Park and Cadre is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Park Electrochemical and Cadre Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadre Holdings 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 Cadre Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadre Holdings has no effect on the direction of Park Electrochemical i.e., Park Electrochemical and Cadre Holdings go up and down completely randomly.

Pair Corralation between Park Electrochemical and Cadre Holdings

Considering the 90-day investment horizon Park Electrochemical is expected to generate 0.74 times more return on investment than Cadre Holdings. However, Park Electrochemical is 1.35 times less risky than Cadre Holdings. It trades about -0.01 of its potential returns per unit of risk. Cadre Holdings is currently generating about -0.03 per unit of risk. If you would invest  1,439  in Park Electrochemical on December 27, 2024 and sell it today you would lose (28.00) from holding Park Electrochemical or give up 1.95% of portfolio value over 90 days.

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

Park Electrochemical  vs.  Cadre Holdings

Park Electrochemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Park Electrochemical has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Cadre Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cadre Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cadre Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Park Electrochemical and Cadre Holdings

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

The idea behind Park Electrochemical and Cadre Holdings 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 Commodity Directory module to find actively traded commodities issued by global exchanges.