Correlation Between Park Ohio and WELLS

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

By analyzing existing cross correlation between Park Ohio Holdings and WELLS FARGO BK, you can compare the effects of market volatilities on Park Ohio and WELLS 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 Ohio with a short position of WELLS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Park Ohio and WELLS.

Diversification Opportunities for Park Ohio and WELLS

-0.1

Correlation Coefficient

Park Ohio  WELLS

Good diversification

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

Pair Corralation between Park Ohio and WELLS

Given the investment horizon of 90 days Park Ohio is expected to generate 21.17 times less return on investment than WELLS. But when comparing it to its historical volatility, Park Ohio Holdings is 26.32 times less risky than WELLS. It trades about 0.08 of its potential returns per unit of risk. WELLS FARGO BK is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10,562  in WELLS FARGO BK on September 13, 2024 and sell it today you would lose (612.00) from holding WELLS FARGO BK or give up 5.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	34.75%
Values	Daily Returns

Park Ohio Holdings  vs.  WELLS FARGO BK

Park Ohio Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Park Ohio Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Park Ohio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WELLS FARGO BK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WELLS FARGO BK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for WELLS FARGO BK investors.

Pair Trading with Park Ohio and WELLS

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

The idea behind Park Ohio Holdings and WELLS FARGO BK 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.