Correlation Between Parker Hannifin and CDN IMPERIAL

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

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

Diversification Opportunities for Parker Hannifin and CDN IMPERIAL

0.91

Correlation Coefficient

Parker Hannifin  CDN IMPERIAL

Almost no diversification

The 3 months correlation between Parker and CDN is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and CDN IMPERIAL BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDN IMPERIAL BANK and Parker Hannifin 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 Parker Hannifin are associated (or correlated) with CDN IMPERIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDN IMPERIAL BANK has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and CDN IMPERIAL go up and down completely randomly.

Pair Corralation between Parker Hannifin and CDN IMPERIAL

Assuming the 90 days horizon Parker Hannifin is expected to generate 2.42 times more return on investment than CDN IMPERIAL. However, Parker Hannifin is 2.42 times more volatile than CDN IMPERIAL BANK. It trades about 0.15 of its potential returns per unit of risk. CDN IMPERIAL BANK is currently generating about 0.29 per unit of risk. If you would invest  52,925  in Parker Hannifin on September 14, 2024 and sell it today you would earn a total of  11,455  from holding Parker Hannifin or generate 21.64% return on investment over 90 days.

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

Parker Hannifin  vs.  CDN IMPERIAL BANK

Parker Hannifin

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Parker Hannifin reported solid returns over the last few months and may actually be approaching a breakup point.

CDN IMPERIAL BANK

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CDN IMPERIAL BANK are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, CDN IMPERIAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Parker Hannifin and CDN IMPERIAL

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

The idea behind Parker Hannifin and CDN IMPERIAL BANK 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.