Correlation Between Parker Hannifin and Anheuser Busch

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

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

Diversification Opportunities for Parker Hannifin and Anheuser Busch

-0.87

Correlation Coefficient

Parker Hannifin  Anheuser Busch

Pay attention - limited upside

The 3 months correlation between Parker and Anheuser is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Anheuser Busch Inbev in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch Inbev 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 Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch Inbev has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Anheuser Busch go up and down completely randomly.

Pair Corralation between Parker Hannifin and Anheuser Busch

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 0.88 times more return on investment than Anheuser Busch. However, Parker Hannifin is 1.14 times less risky than Anheuser Busch. It trades about -0.21 of its potential returns per unit of risk. Anheuser Busch Inbev is currently generating about -0.43 per unit of risk. If you would invest  69,168  in Parker Hannifin on September 19, 2024 and sell it today you would lose (2,569) from holding Parker Hannifin or give up 3.71% of portfolio value over 90 days.

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

Parker Hannifin  vs.  Anheuser Busch Inbev

Parker Hannifin

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal technical indicators, Parker Hannifin may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Anheuser Busch Inbev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch Inbev has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Parker Hannifin and Anheuser Busch

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

The idea behind Parker Hannifin and Anheuser Busch Inbev 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.