Correlation Between Parker Hannifin and Topbuild Corp

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

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

Diversification Opportunities for Parker Hannifin and Topbuild Corp

0.67

Correlation Coefficient

Parker Hannifin  Topbuild Corp

Poor diversification

The 3 months correlation between Parker and Topbuild is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Topbuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topbuild Corp 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 Topbuild Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topbuild Corp has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Topbuild Corp go up and down completely randomly.

Pair Corralation between Parker Hannifin and Topbuild Corp

Allowing for the 90-day total investment horizon Parker Hannifin is expected to under-perform the Topbuild Corp. But the stock apears to be less risky and, when comparing its historical volatility, Parker Hannifin is 1.18 times less risky than Topbuild Corp. The stock trades about 0.0 of its potential returns per unit of risk. The Topbuild Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  31,380  in Topbuild Corp on December 25, 2024 and sell it today you would earn a total of  130.00  from holding Topbuild Corp or generate 0.41% return on investment over 90 days.

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

Parker Hannifin  vs.  Topbuild Corp

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.

Topbuild Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Topbuild Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Topbuild Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Parker Hannifin and Topbuild Corp

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

The idea behind Parker Hannifin and Topbuild Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.