Correlation Between Park Electrochemical and DDC Enterprise

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

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

Diversification Opportunities for Park Electrochemical and DDC Enterprise

-0.73

Correlation Coefficient

Park Electrochemical  DDC Enterprise

Pay attention - limited upside

The 3 months correlation between Park and DDC is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Park Electrochemical and DDC Enterprise Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DDC Enterprise 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 DDC Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DDC Enterprise has no effect on the direction of Park Electrochemical i.e., Park Electrochemical and DDC Enterprise go up and down completely randomly.

Pair Corralation between Park Electrochemical and DDC Enterprise

Considering the 90-day investment horizon Park Electrochemical is expected to under-perform the DDC Enterprise. But the stock apears to be less risky and, when comparing its historical volatility, Park Electrochemical is 3.34 times less risky than DDC Enterprise. The stock trades about -0.12 of its potential returns per unit of risk. The DDC Enterprise Limited is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  17.00  in DDC Enterprise Limited on October 8, 2024 and sell it today you would earn a total of  3.00  from holding DDC Enterprise Limited or generate 17.65% return on investment over 90 days.

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

Park Electrochemical  vs.  DDC Enterprise Limited

Park Electrochemical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Park Electrochemical are ranked lower than 6 (%) 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.

DDC Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DDC Enterprise Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Park Electrochemical and DDC Enterprise

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

The idea behind Park Electrochemical and DDC Enterprise Limited 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.