Correlation Between Park Electrochemical and SIMON

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

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

Diversification Opportunities for Park Electrochemical and SIMON

0.1

Correlation Coefficient

Park Electrochemical  SIMON

Average diversification

The 3 months correlation between Park and SIMON is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Park Electrochemical and SIMON PPTY GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMON PPTY 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 SIMON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMON PPTY GROUP has no effect on the direction of Park Electrochemical i.e., Park Electrochemical and SIMON go up and down completely randomly.

Pair Corralation between Park Electrochemical and SIMON

Considering the 90-day investment horizon Park Electrochemical is expected to under-perform the SIMON. In addition to that, Park Electrochemical is 16.82 times more volatile than SIMON PPTY GROUP. It trades about -0.03 of its total potential returns per unit of risk. SIMON PPTY GROUP is currently generating about 0.05 per unit of volatility. If you would invest  9,925  in SIMON PPTY GROUP on December 21, 2024 and sell it today you would earn a total of  29.00  from holding SIMON PPTY GROUP or generate 0.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Park Electrochemical  vs.  SIMON PPTY 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.

SIMON PPTY GROUP

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Park Electrochemical and SIMON

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

The idea behind Park Electrochemical and SIMON PPTY 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.