Correlation Between Parker Hannifin and NioCorp Developments

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

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

Diversification Opportunities for Parker Hannifin and NioCorp Developments

0.54

Correlation Coefficient

Parker Hannifin  NioCorp Developments

Very weak diversification

The 3 months correlation between Parker and NioCorp is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and NioCorp Developments Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NioCorp Developments 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 NioCorp Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NioCorp Developments has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and NioCorp Developments go up and down completely randomly.

Pair Corralation between Parker Hannifin and NioCorp Developments

Allowing for the 90-day total investment horizon Parker Hannifin is expected to under-perform the NioCorp Developments. But the stock apears to be less risky and, when comparing its historical volatility, Parker Hannifin is 3.16 times less risky than NioCorp Developments. The stock trades about -0.01 of its potential returns per unit of risk. The NioCorp Developments Ltd is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  141.00  in NioCorp Developments Ltd on December 27, 2024 and sell it today you would earn a total of  64.30  from holding NioCorp Developments Ltd or generate 45.6% return on investment over 90 days.

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

Parker Hannifin  vs.  NioCorp Developments Ltd

Parker Hannifin

Risk-Adjusted Performance

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.

NioCorp Developments

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NioCorp Developments Ltd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, NioCorp Developments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Parker Hannifin and NioCorp Developments

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

The idea behind Parker Hannifin and NioCorp Developments Ltd 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.