Correlation Between Parker Hannifin and Southern

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

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

Diversification Opportunities for Parker Hannifin and Southern

-0.66

Correlation Coefficient

Parker Hannifin  Southern

Excellent diversification

The 3 months correlation between Parker and Southern is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Southern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern 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 Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Southern go up and down completely randomly.

Pair Corralation between Parker Hannifin and Southern

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 2.75 times more return on investment than Southern. However, Parker Hannifin is 2.75 times more volatile than Southern Co. It trades about 0.02 of its potential returns per unit of risk. Southern Co is currently generating about -0.21 per unit of risk. If you would invest  63,773  in Parker Hannifin on September 19, 2024 and sell it today you would earn a total of  607.00  from holding Parker Hannifin or generate 0.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Parker Hannifin  vs.  Southern Co

Parker Hannifin

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 6 (%) 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 January 2025.

Southern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred Stock's forward-looking indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Parker Hannifin and Southern

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

The idea behind Parker Hannifin and Southern Co 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.