Correlation Between Park Electrochemical and KWESST Micro

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

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

Diversification Opportunities for Park Electrochemical and KWESST Micro

0.38

Correlation Coefficient

Park Electrochemical  KWESST Micro

Weak diversification

The 3 months correlation between Park and KWESST is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Park Electrochemical and KWESST Micro Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KWESST Micro Systems 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 KWESST Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KWESST Micro Systems has no effect on the direction of Park Electrochemical i.e., Park Electrochemical and KWESST Micro go up and down completely randomly.

Pair Corralation between Park Electrochemical and KWESST Micro

Considering the 90-day investment horizon Park Electrochemical is expected to under-perform the KWESST Micro. But the stock apears to be less risky and, when comparing its historical volatility, Park Electrochemical is 16.48 times less risky than KWESST Micro. The stock trades about -0.21 of its potential returns per unit of risk. The KWESST Micro Systems is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  50.00  in KWESST Micro Systems on December 2, 2024 and sell it today you would lose (7.00) from holding KWESST Micro Systems or give up 14.0% of portfolio value over 90 days.

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

Park Electrochemical  vs.  KWESST Micro Systems

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 latest unsteady performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

KWESST Micro Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days KWESST Micro Systems 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 basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Park Electrochemical and KWESST Micro

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

The idea behind Park Electrochemical and KWESST Micro Systems 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.