Correlation Between PSQ Holdings and Park Electrochemical

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

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

Diversification Opportunities for PSQ Holdings and Park Electrochemical

0.8

Correlation Coefficient

PSQ Holdings  Park Electrochemical

Very poor diversification

The 3 months correlation between PSQ and Park is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding PSQ Holdings and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical and PSQ Holdings 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 PSQ Holdings are associated (or correlated) with Park Electrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Electrochemical has no effect on the direction of PSQ Holdings i.e., PSQ Holdings and Park Electrochemical go up and down completely randomly.

Pair Corralation between PSQ Holdings and Park Electrochemical

Given the investment horizon of 90 days PSQ Holdings is expected to under-perform the Park Electrochemical. In addition to that, PSQ Holdings is 3.15 times more volatile than Park Electrochemical. It trades about -0.09 of its total potential returns per unit of risk. Park Electrochemical is currently generating about -0.09 per unit of volatility. If you would invest  1,496  in Park Electrochemical on December 17, 2024 and sell it today you would lose (150.00) from holding Park Electrochemical or give up 10.03% of portfolio value over 90 days.

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

PSQ Holdings  vs.  Park Electrochemical

PSQ Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days PSQ 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 April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Park Electrochemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Park Electrochemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with PSQ Holdings and Park Electrochemical

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

The idea behind PSQ Holdings and Park Electrochemical 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 Transaction History module to view history of all your transactions and understand their impact on performance.