Correlation Between Parker Hannifin and GENERAL

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

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

Diversification Opportunities for Parker Hannifin and GENERAL

-0.22

Correlation Coefficient

Parker Hannifin  GENERAL

Very good diversification

The 3 months correlation between Parker and GENERAL is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and GENERAL go up and down completely randomly.

Pair Corralation between Parker Hannifin and GENERAL

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 1.48 times more return on investment than GENERAL. However, Parker Hannifin is 1.48 times more volatile than GENERAL ELEC CAP. It trades about 0.1 of its potential returns per unit of risk. GENERAL ELEC CAP is currently generating about -0.44 per unit of risk. If you would invest  62,218  in Parker Hannifin on October 26, 2024 and sell it today you would earn a total of  5,791  from holding Parker Hannifin or generate 9.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	18.64%
Values	Daily Returns

Parker Hannifin  vs.  GENERAL ELEC CAP

Parker Hannifin

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 8 (%) 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 February 2025.

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for GENERAL ELEC CAP investors.

Pair Trading with Parker Hannifin and GENERAL

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

The idea behind Parker Hannifin and GENERAL ELEC CAP 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..