Correlation Between Parker Hannifin and Park Ohio

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

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

Diversification Opportunities for Parker Hannifin and Park Ohio

0.76

Correlation Coefficient

Parker Hannifin  Park Ohio

Poor diversification

The 3 months correlation between Parker and Park is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Park Ohio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Ohio Holdings 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 Park Ohio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Ohio Holdings has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Park Ohio go up and down completely randomly.

Pair Corralation between Parker Hannifin and Park Ohio

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 0.55 times more return on investment than Park Ohio. However, Parker Hannifin is 1.81 times less risky than Park Ohio. It trades about -0.33 of its potential returns per unit of risk. Park Ohio Holdings is currently generating about -0.45 per unit of risk. If you would invest  68,600  in Parker Hannifin on October 8, 2024 and sell it today you would lose (4,832) from holding Parker Hannifin or give up 7.04% of portfolio value over 90 days.

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

Parker Hannifin  vs.  Park Ohio Holdings

Parker Hannifin

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 2 (%) 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.

Park Ohio Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Park Ohio Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Parker Hannifin and Park Ohio

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

The idea behind Parker Hannifin and Park Ohio Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.