Correlation Between MARTIN and Park Electrochemical

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

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

Diversification Opportunities for MARTIN and Park Electrochemical

-0.13

Correlation Coefficient

MARTIN  Park Electrochemical

Good diversification

The 3 months correlation between MARTIN and Park is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding MARTIN MARIETTA MATLS and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical and MARTIN 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 MARTIN MARIETTA MATLS 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 MARTIN i.e., MARTIN and Park Electrochemical go up and down completely randomly.

Pair Corralation between MARTIN and Park Electrochemical

Assuming the 90 days trading horizon MARTIN is expected to generate 14.17 times less return on investment than Park Electrochemical. But when comparing it to its historical volatility, MARTIN MARIETTA MATLS is 4.54 times less risky than Park Electrochemical. It trades about 0.01 of its potential returns per unit of risk. Park Electrochemical is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,290  in Park Electrochemical on October 13, 2024 and sell it today you would earn a total of  88.00  from holding Park Electrochemical or generate 6.82% return on investment over 90 days.

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

MARTIN MARIETTA MATLS  vs.  Park Electrochemical

MARTIN MARIETTA MATLS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MARTIN MARIETTA MATLS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MARTIN is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Park Electrochemical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Park Electrochemical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking signals, Park Electrochemical is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MARTIN and Park Electrochemical

The main advantage of trading using opposite MARTIN and Park Electrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MARTIN 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 MARTIN MARIETTA MATLS 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.