Correlation Between Park Electrochemical and Small Cap
Can any of the company-specific risk be diversified away by investing in both Park Electrochemical and Small Cap 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 Park Electrochemical and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Park Electrochemical and Small Cap Core, you can compare the effects of market volatilities on Park Electrochemical and Small Cap 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 Park Electrochemical with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Park Electrochemical and Small Cap.
Diversification Opportunities for Park Electrochemical and Small Cap
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Park and Small is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Park Electrochemical and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core and Park Electrochemical 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 Park Electrochemical are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of Park Electrochemical i.e., Park Electrochemical and Small Cap go up and down completely randomly.
Pair Corralation between Park Electrochemical and Small Cap
Considering the 90-day investment horizon Park Electrochemical is expected to generate 1.01 times less return on investment than Small Cap. In addition to that, Park Electrochemical is 1.3 times more volatile than Small Cap Core. It trades about 0.1 of its total potential returns per unit of risk. Small Cap Core is currently generating about 0.13 per unit of volatility. If you would invest 1,374 in Small Cap Core on August 24, 2024 and sell it today you would earn a total of 62.00 from holding Small Cap Core or generate 4.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Park Electrochemical vs. Small Cap Core
Performance |
| Timeline |
| Park Electrochemical |
| Small Cap Core |
Park Electrochemical and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Park Electrochemical and Small Cap
The main advantage of trading using opposite Park Electrochemical and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Electrochemical position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Park Electrochemical vs. Innovative Solutions and | Park Electrochemical vs. VSE Corporation | Park Electrochemical vs. Curtiss Wright | Park Electrochemical vs. Ducommun Incorporated |
| Small Cap vs. Ab Government Exchange | Small Cap vs. Us Government Securities | Small Cap vs. John Hancock Government | Small Cap vs. Virtus Seix Government |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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