Correlation Between Park Electrochemical and Hurco Companies

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

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

Diversification Opportunities for Park Electrochemical and Hurco Companies

0.19

Correlation Coefficient

Park Electrochemical  Hurco Companies

Average diversification

The 3 months correlation between Park and Hurco is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Park Electrochemical and Hurco Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hurco Companies 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 Hurco Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hurco Companies has no effect on the direction of Park Electrochemical i.e., Park Electrochemical and Hurco Companies go up and down completely randomly.

Pair Corralation between Park Electrochemical and Hurco Companies

Considering the 90-day investment horizon Park Electrochemical is expected to generate 0.66 times more return on investment than Hurco Companies. However, Park Electrochemical is 1.52 times less risky than Hurco Companies. It trades about -0.05 of its potential returns per unit of risk. Hurco Companies is currently generating about -0.09 per unit of risk. If you would invest  1,482  in Park Electrochemical on October 9, 2024 and sell it today you would lose (50.00) from holding Park Electrochemical or give up 3.37% of portfolio value over 90 days.

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

Park Electrochemical  vs.  Hurco Companies

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 unsteady forward-looking signals, Park Electrochemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hurco Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hurco Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Park Electrochemical and Hurco Companies

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

The idea behind Park Electrochemical and Hurco Companies 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.