Correlation Between Consol Energy and Parker Hannifin

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

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

Diversification Opportunities for Consol Energy and Parker Hannifin

0.96

Correlation Coefficient

Consol Energy  Parker Hannifin

Almost no diversification

The 3 months correlation between Consol and Parker is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and Parker Hannifin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Hannifin and Consol Energy 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 Consol Energy are associated (or correlated) with Parker Hannifin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parker Hannifin has no effect on the direction of Consol Energy i.e., Consol Energy and Parker Hannifin go up and down completely randomly.

Pair Corralation between Consol Energy and Parker Hannifin

Given the investment horizon of 90 days Consol Energy is expected to generate 1.7 times more return on investment than Parker Hannifin. However, Consol Energy is 1.7 times more volatile than Parker Hannifin. It trades about 0.15 of its potential returns per unit of risk. Parker Hannifin is currently generating about 0.16 per unit of risk. If you would invest  9,344  in Consol Energy on September 12, 2024 and sell it today you would earn a total of  2,244  from holding Consol Energy or generate 24.02% return on investment over 90 days.

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

Consol Energy  vs.  Parker Hannifin

Consol Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Consol Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Consol Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Parker Hannifin

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal technical indicators, Parker Hannifin demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Consol Energy and Parker Hannifin

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

The idea behind Consol Energy and Parker Hannifin 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..