Correlation Between Park Ohio and Valmont Industries

Can any of the company-specific risk be diversified away by investing in both Park Ohio and Valmont Industries 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 Valmont Industries 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 Valmont Industries, you can compare the effects of market volatilities on Park Ohio and Valmont Industries 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 Valmont Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Park Ohio and Valmont Industries.

Diversification Opportunities for Park Ohio and Valmont Industries

0.74

Correlation Coefficient

Park Ohio  Valmont Industries

Poor diversification

The 3 months correlation between Park and Valmont is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Park Ohio Holdings and Valmont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmont Industries 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 Valmont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valmont Industries has no effect on the direction of Park Ohio i.e., Park Ohio and Valmont Industries go up and down completely randomly.

Pair Corralation between Park Ohio and Valmont Industries

Given the investment horizon of 90 days Park Ohio Holdings is expected to generate 1.35 times more return on investment than Valmont Industries. However, Park Ohio is 1.35 times more volatile than Valmont Industries. It trades about 0.06 of its potential returns per unit of risk. Valmont Industries is currently generating about 0.02 per unit of risk. If you would invest  1,314  in Park Ohio Holdings on October 23, 2024 and sell it today you would earn a total of  1,268  from holding Park Ohio Holdings or generate 96.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Park Ohio Holdings  vs.  Valmont Industries

Park Ohio Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Park Ohio Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Valmont Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Valmont Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, Valmont Industries is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Park Ohio and Valmont Industries

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

The idea behind Park Ohio Holdings and Valmont Industries 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.