Correlation Between Park Ohio and Applied Industrial
Can any of the company-specific risk be diversified away by investing in both Park Ohio and Applied Industrial 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 Ohio and Applied Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Park Ohio Holdings and Applied Industrial Technologies, you can compare the effects of market volatilities on Park Ohio and Applied Industrial 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 Ohio with a short position of Applied Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Park Ohio and Applied Industrial.
Diversification Opportunities for Park Ohio and Applied Industrial
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Park and Applied is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Park Ohio Holdings and Applied Industrial Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Industrial and Park Ohio 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 Ohio Holdings are associated (or correlated) with Applied Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Industrial has no effect on the direction of Park Ohio i.e., Park Ohio and Applied Industrial go up and down completely randomly.
Pair Corralation between Park Ohio and Applied Industrial
Given the investment horizon of 90 days Park Ohio Holdings is expected to under-perform the Applied Industrial. In addition to that, Park Ohio is 1.94 times more volatile than Applied Industrial Technologies. It trades about -0.29 of its total potential returns per unit of risk. Applied Industrial Technologies is currently generating about -0.33 per unit of volatility. If you would invest 19,509 in Applied Industrial Technologies on January 24, 2024 and sell it today you would lose (1,149) from holding Applied Industrial Technologies or give up 5.89% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Park Ohio Holdings vs. Applied Industrial Technologie
Performance |
Timeline |
Park Ohio Holdings |
Applied Industrial |
Park Ohio and Applied Industrial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Park Ohio and Applied Industrial
The main advantage of trading using opposite Park Ohio and Applied Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Ohio position performs unexpectedly, Applied Industrial 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 Applied Industrial will offset losses from the drop in Applied Industrial's long position.Park Ohio vs. Emerson Electric | Park Ohio vs. Eaton PLC | Park Ohio vs. Generac Holdings | Park Ohio vs. Cummins |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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