Correlation Between Park National and Cheniere Energy

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

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

Diversification Opportunities for Park National and Cheniere Energy

0.66

Correlation Coefficient

Park National  Cheniere Energy

Poor diversification

The 3 months correlation between Park and Cheniere is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Park National and Cheniere Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy Partners and Park National 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 National are associated (or correlated) with Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy Partners has no effect on the direction of Park National i.e., Park National and Cheniere Energy go up and down completely randomly.

Pair Corralation between Park National and Cheniere Energy

Considering the 90-day investment horizon Park National is expected to generate 1.22 times more return on investment than Cheniere Energy. However, Park National is 1.22 times more volatile than Cheniere Energy Partners. It trades about 0.04 of its potential returns per unit of risk. Cheniere Energy Partners is currently generating about 0.02 per unit of risk. If you would invest  13,241  in Park National on October 4, 2024 and sell it today you would earn a total of  4,097  from holding Park National or generate 30.94% return on investment over 90 days.

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

Park National  vs.  Cheniere Energy Partners

Park National

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Park National are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Park National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cheniere Energy Partners

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Cheniere Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Park National and Cheniere Energy

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

The idea behind Park National and Cheniere Energy Partners 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.