Correlation Between Park Lawn and Evonik Industries

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

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

Diversification Opportunities for Park Lawn and Evonik Industries

-0.84

Correlation Coefficient

Park Lawn  Evonik Industries

Pay attention - limited upside

The 3 months correlation between Park and Evonik is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Park Lawn and Evonik Industries AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evonik Industries and Park Lawn 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 Lawn are associated (or correlated) with Evonik Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evonik Industries has no effect on the direction of Park Lawn i.e., Park Lawn and Evonik Industries go up and down completely randomly.

Pair Corralation between Park Lawn and Evonik Industries

Assuming the 90 days horizon Park Lawn is expected to generate 2.16 times more return on investment than Evonik Industries. However, Park Lawn is 2.16 times more volatile than Evonik Industries AG. It trades about 0.13 of its potential returns per unit of risk. Evonik Industries AG is currently generating about 0.01 per unit of risk. If you would invest  1,154  in Park Lawn on October 12, 2024 and sell it today you would earn a total of  769.00  from holding Park Lawn or generate 66.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	53.16%
Values	Daily Returns

Park Lawn  vs.  Evonik Industries AG

Park Lawn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Park Lawn has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Park Lawn is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Evonik Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evonik Industries AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Park Lawn and Evonik Industries

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

The idea behind Park Lawn and Evonik Industries AG 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.