Correlation Between Park Electrochemical and Thales SA

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

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

Diversification Opportunities for Park Electrochemical and Thales SA

-0.38

Correlation Coefficient

Park Electrochemical  Thales SA

Very good diversification

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

Pair Corralation between Park Electrochemical and Thales SA

Considering the 90-day investment horizon Park Electrochemical is expected to generate 0.8 times more return on investment than Thales SA. However, Park Electrochemical is 1.25 times less risky than Thales SA. It trades about 0.04 of its potential returns per unit of risk. Thales SA is currently generating about 0.03 per unit of risk. If you would invest  1,163  in Park Electrochemical on September 29, 2024 and sell it today you would earn a total of  326.00  from holding Park Electrochemical or generate 28.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.75%
Values	Daily Returns

Park Electrochemical  vs.  Thales 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 unsteady forward-looking signals, Park Electrochemical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Thales SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thales SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Park Electrochemical and Thales SA

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

The idea behind Park Electrochemical and Thales 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.