Correlation Between Primoris Services and Park Ohio

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

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

Diversification Opportunities for Primoris Services and Park Ohio

0.06

Correlation Coefficient

Primoris Services  Park Ohio

Significant diversification

The 3 months correlation between Primoris and Park is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Primoris Services and Park Ohio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Ohio Holdings and Primoris Services 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 Primoris Services are associated (or correlated) with Park Ohio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Ohio Holdings has no effect on the direction of Primoris Services i.e., Primoris Services and Park Ohio go up and down completely randomly.

Pair Corralation between Primoris Services and Park Ohio

Given the investment horizon of 90 days Primoris Services is expected to generate 0.77 times more return on investment than Park Ohio. However, Primoris Services is 1.29 times less risky than Park Ohio. It trades about 0.12 of its potential returns per unit of risk. Park Ohio Holdings is currently generating about 0.06 per unit of risk. If you would invest  2,614  in Primoris Services on October 23, 2024 and sell it today you would earn a total of  6,264  from holding Primoris Services or generate 239.61% return on investment over 90 days.

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

Primoris Services  vs.  Park Ohio Holdings

Primoris Services

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Primoris Services are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Primoris Services displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Primoris Services and Park Ohio

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

The idea behind Primoris Services and Park Ohio Holdings 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.