Correlation Between AAR Corp and Park Electrochemical
Can any of the company-specific risk be diversified away by investing in both AAR Corp 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 AAR Corp and Park Electrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAR Corp and Park Electrochemical, you can compare the effects of market volatilities on AAR Corp 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 AAR Corp with a short position of Park Electrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAR Corp and Park Electrochemical.
Diversification Opportunities for AAR Corp and Park Electrochemical
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between AAR and Park is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding AAR Corp and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical and AAR Corp 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 AAR Corp 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 AAR Corp i.e., AAR Corp and Park Electrochemical go up and down completely randomly.
Pair Corralation between AAR Corp and Park Electrochemical
Considering the 90-day investment horizon AAR Corp is expected to generate 1.63 times less return on investment than Park Electrochemical. In addition to that, AAR Corp is 1.02 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 0.15 per unit of volatility. If you would invest 1,312 in Park Electrochemical on August 26, 2024 and sell it today you would earn a total of 199.00 from holding Park Electrochemical or generate 15.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AAR Corp vs. Park Electrochemical
Performance |
| Timeline |
| AAR Corp |
| Park Electrochemical |
AAR Corp and Park Electrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAR Corp and Park Electrochemical
The main advantage of trading using opposite AAR Corp and Park Electrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAR Corp 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 AAR Corp 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.| Park Electrochemical vs. Innovative Solutions and | Park Electrochemical vs. VSE Corporation | Park Electrochemical vs. Curtiss Wright | Park Electrochemical vs. Ducommun Incorporated |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| CEOs Directory Screen CEOs from public companies around the world | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |