Correlation Between Park Electrochemical and AMERICAN

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

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

Diversification Opportunities for Park Electrochemical and AMERICAN

-0.28

Correlation Coefficient

Park Electrochemical  AMERICAN

Very good diversification

The 3 months correlation between Park and AMERICAN is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Park Electrochemical and AMERICAN FINL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN FINL GROUP 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN FINL GROUP has no effect on the direction of Park Electrochemical i.e., Park Electrochemical and AMERICAN go up and down completely randomly.

Pair Corralation between Park Electrochemical and AMERICAN

Considering the 90-day investment horizon Park Electrochemical is expected to under-perform the AMERICAN. In addition to that, Park Electrochemical is 2.28 times more volatile than AMERICAN FINL GROUP. It trades about -0.03 of its total potential returns per unit of risk. AMERICAN FINL GROUP is currently generating about 0.04 per unit of volatility. If you would invest  8,340  in AMERICAN FINL GROUP on December 21, 2024 and sell it today you would earn a total of  145.00  from holding AMERICAN FINL GROUP or generate 1.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Park Electrochemical  vs.  AMERICAN FINL GROUP

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 rather sound forward-looking signals, Park Electrochemical is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

AMERICAN FINL GROUP

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMERICAN FINL GROUP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AMERICAN is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Park Electrochemical and AMERICAN

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

The idea behind Park Electrochemical and AMERICAN FINL GROUP 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.