Correlation Between Sealed Air and Park Electrochemical

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

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

Diversification Opportunities for Sealed Air and Park Electrochemical

0.26

Correlation Coefficient

Sealed Air  Park Electrochemical

Modest diversification

The 3 months correlation between Sealed and Park is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical and Sealed Air 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 Sealed Air 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 Sealed Air i.e., Sealed Air and Park Electrochemical go up and down completely randomly.

Pair Corralation between Sealed Air and Park Electrochemical

Considering the 90-day investment horizon Sealed Air is expected to under-perform the Park Electrochemical. In addition to that, Sealed Air is 1.04 times more volatile than Park Electrochemical. It trades about -0.02 of its total potential returns per unit of risk. Park Electrochemical is currently generating about 0.03 per unit of volatility. If you would invest  1,241  in Park Electrochemical on October 1, 2024 and sell it today you would earn a total of  211.00  from holding Park Electrochemical or generate 17.0% return on investment over 90 days.

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

Sealed Air  vs.  Park Electrochemical

Sealed Air

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sealed Air has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Sealed Air is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Park Electrochemical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Park Electrochemical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, Park Electrochemical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sealed Air and Park Electrochemical

The main advantage of trading using opposite Sealed Air and Park Electrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sealed Air 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 Sealed Air 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.