Correlation Between Jacobs Solutions and Parker Hannifin

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

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

Diversification Opportunities for Jacobs Solutions and Parker Hannifin

0.23

Correlation Coefficient

Jacobs Solutions  Parker Hannifin

Modest diversification

The 3 months correlation between Jacobs and Parker is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Parker Hannifin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Hannifin and Jacobs Solutions 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 Jacobs Solutions 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 Jacobs Solutions i.e., Jacobs Solutions and Parker Hannifin go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Parker Hannifin

Taking into account the 90-day investment horizon Jacobs Solutions is expected to under-perform the Parker Hannifin. But the stock apears to be less risky and, when comparing its historical volatility, Jacobs Solutions is 1.05 times less risky than Parker Hannifin. The stock trades about -0.03 of its potential returns per unit of risk. The Parker Hannifin is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  63,003  in Parker Hannifin on October 10, 2024 and sell it today you would earn a total of  520.00  from holding Parker Hannifin or generate 0.83% return on investment over 90 days.

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

Jacobs Solutions  vs.  Parker Hannifin

Jacobs Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jacobs Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady forward-looking indicators, Jacobs Solutions is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Parker Hannifin

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Parker Hannifin is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Jacobs Solutions and Parker Hannifin

The main advantage of trading using opposite Jacobs Solutions and Parker Hannifin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jacobs Solutions 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 Jacobs Solutions 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.