Correlation Between Park Electrochemical and Aris Water

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

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

Diversification Opportunities for Park Electrochemical and Aris Water

-0.63

Correlation Coefficient

Park Electrochemical  Aris Water

Excellent diversification

The 3 months correlation between Park and Aris is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Park Electrochemical and Aris Water Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aris Water Solutions 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 Aris Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aris Water Solutions has no effect on the direction of Park Electrochemical i.e., Park Electrochemical and Aris Water go up and down completely randomly.

Pair Corralation between Park Electrochemical and Aris Water

Considering the 90-day investment horizon Park Electrochemical is expected to generate 0.95 times more return on investment than Aris Water. However, Park Electrochemical is 1.05 times less risky than Aris Water. It trades about 0.2 of its potential returns per unit of risk. Aris Water Solutions is currently generating about 0.01 per unit of risk. If you would invest  1,305  in Park Electrochemical on May 7, 2025 and sell it today you would earn a total of  509.00  from holding Park Electrochemical or generate 39.0% return on investment over 90 days.

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

Park Electrochemical  vs.  Aris Water Solutions

Park Electrochemical

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Park Electrochemical are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward-looking signals, Park Electrochemical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Aris Water Solutions

Risk-Adjusted Performance

Weakest

Over the last 90 days Aris Water Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Aris Water is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Park Electrochemical and Aris Water

The main advantage of trading using opposite Park Electrochemical and Aris Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Electrochemical position performs unexpectedly, Aris Water 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 Aris Water will offset losses from the drop in Aris Water's long position.

The idea behind Park Electrochemical and Aris Water Solutions 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.