Correlation Between Enpro Industries and Parker Hannifin

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

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

Diversification Opportunities for Enpro Industries and Parker Hannifin

0.71

Correlation Coefficient

Enpro Industries  Parker Hannifin

Poor diversification

The 3 months correlation between Enpro and Parker is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Enpro Industries and Parker Hannifin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Hannifin and Enpro Industries 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 Enpro Industries 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 Enpro Industries i.e., Enpro Industries and Parker Hannifin go up and down completely randomly.

Pair Corralation between Enpro Industries and Parker Hannifin

Considering the 90-day investment horizon Enpro Industries is expected to generate 1.09 times more return on investment than Parker Hannifin. However, Enpro Industries is 1.09 times more volatile than Parker Hannifin. It trades about 0.02 of its potential returns per unit of risk. Parker Hannifin is currently generating about -0.01 per unit of risk. If you would invest  17,323  in Enpro Industries on December 27, 2024 and sell it today you would earn a total of  126.00  from holding Enpro Industries or generate 0.73% return on investment over 90 days.

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

Enpro Industries  vs.  Parker Hannifin

Enpro Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enpro Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Enpro Industries is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Parker Hannifin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parker Hannifin has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Enpro Industries and Parker Hannifin

The main advantage of trading using opposite Enpro Industries and Parker Hannifin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enpro Industries 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 Enpro Industries 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.