Correlation Between AAR Corp and Park Electrochemical
Can any of the company-specific risk be diversified away by investing in both AAR Corp 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 AAR Corp and Park Electrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAR Corp and Park Electrochemical, you can compare the effects of market volatilities on AAR Corp 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 AAR Corp with a short position of Park Electrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAR Corp and Park Electrochemical.
Diversification Opportunities for AAR Corp and Park Electrochemical
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AAR and Park is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding AAR Corp and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical and AAR Corp 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 AAR Corp 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 AAR Corp i.e., AAR Corp and Park Electrochemical go up and down completely randomly.
Pair Corralation between AAR Corp and Park Electrochemical
Considering the 90-day investment horizon AAR Corp is expected to generate 1.31 times less return on investment than Park Electrochemical. In addition to that, AAR Corp is 1.88 times more volatile than Park Electrochemical. It trades about 0.02 of its total potential returns per unit of risk. Park Electrochemical is currently generating about 0.05 per unit of volatility. If you would invest 1,344 in Park Electrochemical on March 12, 2025 and sell it today you would earn a total of 67.00 from holding Park Electrochemical or generate 4.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AAR Corp vs. Park Electrochemical
Performance |
| Timeline |
| AAR Corp |
| Park Electrochemical |
AAR Corp and Park Electrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAR Corp and Park Electrochemical
The main advantage of trading using opposite AAR Corp and Park Electrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAR Corp 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.| AAR Corp vs. Curtiss Wright | AAR Corp vs. Hexcel | AAR Corp vs. Moog Inc | AAR Corp vs. Ducommun Incorporated |
| Park Electrochemical vs. Innovative Solutions and | Park Electrochemical vs. VSE Corporation | Park Electrochemical vs. Curtiss Wright | Park Electrochemical vs. Ducommun Incorporated |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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