Correlation Between Parker Hannifin and China Yuchai

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

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

Diversification Opportunities for Parker Hannifin and China Yuchai

-0.91

Correlation Coefficient

Parker Hannifin  China Yuchai

Pay attention - limited upside

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

Pair Corralation between Parker Hannifin and China Yuchai

Allowing for the 90-day total investment horizon Parker Hannifin is expected to under-perform the China Yuchai. But the stock apears to be less risky and, when comparing its historical volatility, Parker Hannifin is 2.58 times less risky than China Yuchai. The stock trades about -0.15 of its potential returns per unit of risk. The China Yuchai International is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  902.00  in China Yuchai International on September 17, 2024 and sell it today you would earn a total of  0.00  from holding China Yuchai International or generate 0.0% return on investment over 90 days.

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

Parker Hannifin  vs.  China Yuchai International

Parker Hannifin

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, Parker Hannifin may actually be approaching a critical reversion point that can send shares even higher in January 2025.

China Yuchai Interna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Yuchai International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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 China Yuchai

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

The idea behind Parker Hannifin and China Yuchai International 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.