Correlation Between Parker Hannifin and BBB Foods

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

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

Diversification Opportunities for Parker Hannifin and BBB Foods

-0.16

Correlation Coefficient

Parker Hannifin  BBB Foods

Good diversification

The 3 months correlation between Parker and BBB is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods 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 BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and BBB Foods go up and down completely randomly.

Pair Corralation between Parker Hannifin and BBB Foods

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 1.58 times less return on investment than BBB Foods. But when comparing it to its historical volatility, Parker Hannifin is 1.85 times less risky than BBB Foods. It trades about 0.11 of its potential returns per unit of risk. BBB Foods is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,750  in BBB Foods on September 21, 2024 and sell it today you would earn a total of  1,170  from holding BBB Foods or generate 66.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	44.24%
Values	Daily Returns

Parker Hannifin  vs.  BBB Foods

Parker Hannifin

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 3 (%) 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.

BBB Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, BBB Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Parker Hannifin and BBB Foods

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

The idea behind Parker Hannifin and BBB Foods 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.