Correlation Between Parker Hannifin and Lendway

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

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

Diversification Opportunities for Parker Hannifin and Lendway

-0.14

Correlation Coefficient

Parker Hannifin  Lendway

Good diversification

The 3 months correlation between Parker and Lendway is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Lendway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendway 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 Lendway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lendway has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Lendway go up and down completely randomly.

Pair Corralation between Parker Hannifin and Lendway

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 0.38 times more return on investment than Lendway. However, Parker Hannifin is 2.6 times less risky than Lendway. It trades about 0.09 of its potential returns per unit of risk. Lendway is currently generating about -0.01 per unit of risk. If you would invest  33,983  in Parker Hannifin on October 26, 2024 and sell it today you would earn a total of  33,951  from holding Parker Hannifin or generate 99.91% return on investment over 90 days.

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

Parker Hannifin  vs.  Lendway

Parker Hannifin

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 7 (%) 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 February 2025.

Lendway

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lendway are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Lendway showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Parker Hannifin and Lendway

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

The idea behind Parker Hannifin and Lendway 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.