Correlation Between Park Electrochemical and Dassault Aviation

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

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

Diversification Opportunities for Park Electrochemical and Dassault Aviation

-0.27

Correlation Coefficient

Park Electrochemical  Dassault Aviation

Very good diversification

The 3 months correlation between Park and Dassault is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Park Electrochemical and Dassault Aviation SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Aviation 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 Dassault Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Aviation has no effect on the direction of Park Electrochemical i.e., Park Electrochemical and Dassault Aviation go up and down completely randomly.

Pair Corralation between Park Electrochemical and Dassault Aviation

Considering the 90-day investment horizon Park Electrochemical is expected to generate 2.05 times less return on investment than Dassault Aviation. But when comparing it to its historical volatility, Park Electrochemical is 1.63 times less risky than Dassault Aviation. It trades about 0.03 of its potential returns per unit of risk. Dassault Aviation SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  15,764  in Dassault Aviation SA on October 3, 2024 and sell it today you would earn a total of  4,700  from holding Dassault Aviation SA or generate 29.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.78%
Values	Daily Returns

Park Electrochemical  vs.  Dassault Aviation SA

Park Electrochemical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Park Electrochemical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward-looking signals, Park Electrochemical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dassault Aviation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dassault Aviation SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Dassault Aviation 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 Electrochemical and Dassault Aviation

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

The idea behind Park Electrochemical and Dassault Aviation SA 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.