Correlation Between Parker Hannifin and Sandvik AB

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

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

Diversification Opportunities for Parker Hannifin and Sandvik AB

-0.54

Correlation Coefficient

Parker Hannifin  Sandvik AB

Excellent diversification

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

Pair Corralation between Parker Hannifin and Sandvik AB

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 1.18 times more return on investment than Sandvik AB. However, Parker Hannifin is 1.18 times more volatile than Sandvik AB ADR. It trades about 0.26 of its potential returns per unit of risk. Sandvik AB ADR is currently generating about -0.19 per unit of risk. If you would invest  62,281  in Parker Hannifin on August 31, 2024 and sell it today you would earn a total of  7,707  from holding Parker Hannifin or generate 12.37% return on investment over 90 days.

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

Parker Hannifin  vs.  Sandvik AB ADR

Parker Hannifin

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Parker Hannifin demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Sandvik AB ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandvik AB ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Parker Hannifin and Sandvik AB

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

The idea behind Parker Hannifin and Sandvik AB ADR 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.