Correlation Between Park Electrochemical and L3Harris Technologies

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Can any of the company-specific risk be diversified away by investing in both Park Electrochemical and L3Harris Technologies 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 L3Harris Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Park Electrochemical and L3Harris Technologies, you can compare the effects of market volatilities on Park Electrochemical and L3Harris Technologies 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 L3Harris Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Park Electrochemical and L3Harris Technologies.

Diversification Opportunities for Park Electrochemical and L3Harris Technologies

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Park and L3Harris is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Park Electrochemical and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris Technologies 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 L3Harris Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L3Harris Technologies has no effect on the direction of Park Electrochemical i.e., Park Electrochemical and L3Harris Technologies go up and down completely randomly.

Pair Corralation between Park Electrochemical and L3Harris Technologies

Considering the 90-day investment horizon Park Electrochemical is expected to generate 1.58 times more return on investment than L3Harris Technologies. However, Park Electrochemical is 1.58 times more volatile than L3Harris Technologies. It trades about 0.16 of its potential returns per unit of risk. L3Harris Technologies is currently generating about 0.01 per unit of risk. If you would invest  1,329  in Park Electrochemical on September 5, 2024 and sell it today you would earn a total of  210.00  from holding Park Electrochemical or generate 15.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Park Electrochemical  vs.  L3Harris Technologies

 Performance 
       Timeline  
Park Electrochemical 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Park Electrochemical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, Park Electrochemical exhibited solid returns over the last few months and may actually be approaching a breakup point.
L3Harris Technologies 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in L3Harris Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, L3Harris Technologies is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Park Electrochemical and L3Harris Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Park Electrochemical and L3Harris Technologies

The main advantage of trading using opposite Park Electrochemical and L3Harris Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Electrochemical position performs unexpectedly, L3Harris Technologies 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 L3Harris Technologies will offset losses from the drop in L3Harris Technologies' long position.
The idea behind Park Electrochemical and L3Harris Technologies 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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