Correlation Between Parker Hannifin and BRP

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

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

Diversification Opportunities for Parker Hannifin and BRP

-0.6

Correlation Coefficient

Parker Hannifin  BRP

Excellent diversification

The 3 months correlation between Parker and BRP is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc 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 BRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRP Inc has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and BRP go up and down completely randomly.

Pair Corralation between Parker Hannifin and BRP

Allowing for the 90-day total investment horizon Parker Hannifin is expected to under-perform the BRP. But the stock apears to be less risky and, when comparing its historical volatility, Parker Hannifin is 1.66 times less risky than BRP. The stock trades about -0.35 of its potential returns per unit of risk. The BRP Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,137  in BRP Inc on October 13, 2024 and sell it today you would lose (38.00) from holding BRP Inc or give up 0.74% of portfolio value over 90 days.

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

Parker Hannifin  vs.  BRP Inc

Parker Hannifin

Risk-Adjusted Performance

0 of 100

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.

BRP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Parker Hannifin and BRP

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

The idea behind Parker Hannifin and BRP Inc 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.