Correlation Between Smurfit WestRock and Park Ohio

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

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

Diversification Opportunities for Smurfit WestRock and Park Ohio

0.57

Correlation Coefficient

Smurfit WestRock  Park Ohio

Very weak diversification

The 3 months correlation between Smurfit and Park is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit WestRock plc 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 Smurfit WestRock 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 Smurfit WestRock plc 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 Smurfit WestRock i.e., Smurfit WestRock and Park Ohio go up and down completely randomly.

Pair Corralation between Smurfit WestRock and Park Ohio

Allowing for the 90-day total investment horizon Smurfit WestRock plc is expected to generate 1.23 times more return on investment than Park Ohio. However, Smurfit WestRock is 1.23 times more volatile than Park Ohio Holdings. It trades about 0.09 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  3,334  in Smurfit WestRock plc on August 19, 2024 and sell it today you would earn a total of  1,832  from holding Smurfit WestRock plc or generate 54.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	72.58%
Values	Daily Returns

Smurfit WestRock plc  vs.  Park Ohio Holdings

Smurfit WestRock plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit WestRock plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Smurfit WestRock showed solid returns over the last few months and may actually be approaching a breakup point.

Park Ohio Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Park Ohio Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Park Ohio may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Smurfit WestRock and Park Ohio

The main advantage of trading using opposite Smurfit WestRock and Park Ohio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smurfit WestRock 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.

The idea behind Smurfit WestRock plc and Park Ohio Holdings 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.