Correlation Between Momentus and Park Electrochemical

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

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

Diversification Opportunities for Momentus and Park Electrochemical

-0.69

Correlation Coefficient

Momentus  Park Electrochemical

Excellent diversification

The 3 months correlation between Momentus and Park is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Momentus and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical and Momentus 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 Momentus 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 Momentus i.e., Momentus and Park Electrochemical go up and down completely randomly.

Pair Corralation between Momentus and Park Electrochemical

Given the investment horizon of 90 days Momentus is expected to generate 5.28 times more return on investment than Park Electrochemical. However, Momentus is 5.28 times more volatile than Park Electrochemical. It trades about 0.09 of its potential returns per unit of risk. Park Electrochemical is currently generating about -0.22 per unit of risk. If you would invest  43.00  in Momentus on January 29, 2024 and sell it today you would earn a total of  5.00  from holding Momentus or generate 11.63% return on investment over 90 days.

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

Momentus  vs.  Park Electrochemical

Momentus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Momentus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Park Electrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Park Electrochemical has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Momentus and Park Electrochemical

The main advantage of trading using opposite Momentus and Park Electrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Momentus 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 Momentus 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.