Correlation Between Axon Enterprise and Park Electrochemical

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

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

Diversification Opportunities for Axon Enterprise and Park Electrochemical

0.47

Correlation Coefficient

Axon Enterprise  Park Electrochemical

Very weak diversification

The 3 months correlation between Axon and Park is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Axon Enterprise and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical and Axon Enterprise 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 Axon Enterprise 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 Axon Enterprise i.e., Axon Enterprise and Park Electrochemical go up and down completely randomly.

Pair Corralation between Axon Enterprise and Park Electrochemical

Given the investment horizon of 90 days Axon Enterprise is expected to generate 0.79 times more return on investment than Park Electrochemical. However, Axon Enterprise is 1.27 times less risky than Park Electrochemical. It trades about -0.16 of its potential returns per unit of risk. Park Electrochemical is currently generating about -0.13 per unit of risk. If you would invest  30,156  in Axon Enterprise on February 23, 2024 and sell it today you would lose (1,669) from holding Axon Enterprise or give up 5.53% of portfolio value over 90 days.

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

Axon Enterprise  vs.  Park Electrochemical

Axon Enterprise

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Axon Enterprise are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Axon Enterprise may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Park Electrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Park Electrochemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Park Electrochemical is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Axon Enterprise and Park Electrochemical

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

The idea behind Axon Enterprise and Park Electrochemical 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.