Correlation Between Gates Industrial and Park Ohio
Can any of the company-specific risk be diversified away by investing in both Gates Industrial and Park Ohio 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 Gates Industrial and Park Ohio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gates Industrial and Park Ohio Holdings, you can compare the effects of market volatilities on Gates Industrial and Park Ohio 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 Gates Industrial with a short position of Park Ohio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gates Industrial and Park Ohio.
Diversification Opportunities for Gates Industrial and Park Ohio
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Gates and Park is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Gates Industrial and Park Ohio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Ohio Holdings and Gates Industrial 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 Gates Industrial are associated (or correlated) with Park Ohio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Ohio Holdings has no effect on the direction of Gates Industrial i.e., Gates Industrial and Park Ohio go up and down completely randomly.
Pair Corralation between Gates Industrial and Park Ohio
Given the investment horizon of 90 days Gates Industrial is expected to generate 0.72 times more return on investment than Park Ohio. However, Gates Industrial is 1.39 times less risky than Park Ohio. It trades about 0.15 of its potential returns per unit of risk. Park Ohio Holdings is currently generating about 0.07 per unit of risk. If you would invest 1,172 in Gates Industrial on September 3, 2024 and sell it today you would earn a total of 1,044 from holding Gates Industrial or generate 89.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gates Industrial vs. Park Ohio Holdings
Performance |
| Timeline |
| Gates Industrial |
| Park Ohio Holdings |
Gates Industrial and Park Ohio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gates Industrial and Park Ohio
The main advantage of trading using opposite Gates Industrial and Park Ohio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gates Industrial position performs unexpectedly, Park Ohio 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 Ohio will offset losses from the drop in Park Ohio's long position.| Gates Industrial vs. Crane NXT Co | Gates Industrial vs. Donaldson | Gates Industrial vs. ITT Inc | Gates Industrial vs. Franklin Electric Co |
| Park Ohio vs. Hurco Companies | Park Ohio vs. Enerpac Tool Group | Park Ohio vs. China Yuchai International | Park Ohio vs. Luxfer Holdings PLC |
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 Stocks Directory module to find actively traded stocks across global markets.
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