Correlation Between Parker Hannifin and Tencent Music

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

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

Diversification Opportunities for Parker Hannifin and Tencent Music

-0.32

Correlation Coefficient

Parker Hannifin  Tencent Music

Very good diversification

The 3 months correlation between Parker and Tencent is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Tencent Music Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Music Entert 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 Tencent Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tencent Music Entert has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Tencent Music go up and down completely randomly.

Pair Corralation between Parker Hannifin and Tencent Music

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 0.45 times more return on investment than Tencent Music. However, Parker Hannifin is 2.24 times less risky than Tencent Music. It trades about -0.3 of its potential returns per unit of risk. Tencent Music Entertainment is currently generating about -0.36 per unit of risk. If you would invest  68,600  in Parker Hannifin on October 8, 2024 and sell it today you would lose (4,500) from holding Parker Hannifin or give up 6.56% of portfolio value over 90 days.

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

Parker Hannifin  vs.  Tencent Music Entertainment

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.

Tencent Music Entert

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tencent Music Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary 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 Tencent Music

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

The idea behind Parker Hannifin and Tencent Music Entertainment 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.