Correlation Between Parker Hannifin and CVW CleanTech

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

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

Diversification Opportunities for Parker Hannifin and CVW CleanTech

-0.13

Correlation Coefficient

Parker Hannifin  CVW CleanTech

Good diversification

The 3 months correlation between Parker and CVW is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and CVW CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CleanTech 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 CVW CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVW CleanTech has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and CVW CleanTech go up and down completely randomly.

Pair Corralation between Parker Hannifin and CVW CleanTech

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 1.37 times less return on investment than CVW CleanTech. But when comparing it to its historical volatility, Parker Hannifin is 5.17 times less risky than CVW CleanTech. It trades about 0.11 of its potential returns per unit of risk. CVW CleanTech is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  86.00  in CVW CleanTech on September 12, 2024 and sell it today you would lose (21.00) from holding CVW CleanTech or give up 24.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Parker Hannifin  vs.  CVW CleanTech

Parker Hannifin

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal technical indicators, Parker Hannifin demonstrated solid returns over the last few months and may actually be approaching a breakup point.

CVW CleanTech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CleanTech are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CVW CleanTech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Parker Hannifin and CVW CleanTech

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

The idea behind Parker Hannifin and CVW CleanTech 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.