Correlation Between Park Electrochemical and Olin

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

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

Diversification Opportunities for Park Electrochemical and Olin

0.04

Correlation Coefficient

Park Electrochemical  Olin

Significant diversification

The 3 months correlation between Park and Olin is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Park Electrochemical and Olin Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olin 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 Olin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olin has no effect on the direction of Park Electrochemical i.e., Park Electrochemical and Olin go up and down completely randomly.

Pair Corralation between Park Electrochemical and Olin

Considering the 90-day investment horizon Park Electrochemical is expected to generate 0.81 times more return on investment than Olin. However, Park Electrochemical is 1.23 times less risky than Olin. It trades about 0.2 of its potential returns per unit of risk. Olin Corporation is currently generating about -0.02 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  492.50  from holding Park Electrochemical or generate 37.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Park Electrochemical  vs.  Olin Corp.

Park Electrochemical

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Park Electrochemical are ranked lower than 15 (%) 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.

Olin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Olin Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Olin is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Park Electrochemical and Olin

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

The idea behind Park Electrochemical and Olin Corporation 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.