Correlation Between Parker Hannifin and SunOpta

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

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

Diversification Opportunities for Parker Hannifin and SunOpta

0.84

Correlation Coefficient

Parker Hannifin  SunOpta

Very poor diversification

The 3 months correlation between Parker and SunOpta is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and SunOpta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunOpta 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 SunOpta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunOpta has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and SunOpta go up and down completely randomly.

Pair Corralation between Parker Hannifin and SunOpta

Allowing for the 90-day total investment horizon Parker Hannifin is expected to under-perform the SunOpta. But the stock apears to be less risky and, when comparing its historical volatility, Parker Hannifin is 1.45 times less risky than SunOpta. The stock trades about -0.21 of its potential returns per unit of risk. The SunOpta is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  745.00  in SunOpta on September 18, 2024 and sell it today you would earn a total of  30.00  from holding SunOpta or generate 4.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Parker Hannifin  vs.  SunOpta

Parker Hannifin

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, Parker Hannifin may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SunOpta

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SunOpta are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, SunOpta disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Parker Hannifin and SunOpta

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

The idea behind Parker Hannifin and SunOpta 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.