Correlation Between Parker Hannifin and Noble Plc

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

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

Diversification Opportunities for Parker Hannifin and Noble Plc

0.22

Correlation Coefficient

Parker Hannifin  Noble Plc

Modest diversification

The 3 months correlation between Parker and Noble is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Noble plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noble plc 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 Noble Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noble plc has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Noble Plc go up and down completely randomly.

Pair Corralation between Parker Hannifin and Noble Plc

Allowing for the 90-day total investment horizon Parker Hannifin is expected to under-perform the Noble Plc. But the stock apears to be less risky and, when comparing its historical volatility, Parker Hannifin is 1.9 times less risky than Noble Plc. The stock trades about -0.23 of its potential returns per unit of risk. The Noble plc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,256  in Noble plc on October 11, 2024 and sell it today you would earn a total of  10.00  from holding Noble plc or generate 0.31% return on investment over 90 days.

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

Parker Hannifin  vs.  Noble plc

Parker Hannifin

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Noble plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Noble plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Noble Plc is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Parker Hannifin and Noble Plc

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

The idea behind Parker Hannifin and Noble plc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.