Correlation Between Parker Hannifin and 404280AM1

Can any of the company-specific risk be diversified away by investing in both Parker Hannifin and 404280AM1 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 404280AM1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Parker Hannifin and HSBC HLDGS PLC, you can compare the effects of market volatilities on Parker Hannifin and 404280AM1 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 404280AM1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parker Hannifin and 404280AM1.

Diversification Opportunities for Parker Hannifin and 404280AM1

-0.23

Correlation Coefficient

Parker Hannifin  404280AM1

Very good diversification

The 3 months correlation between Parker and 404280AM1 is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and HSBC HLDGS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC HLDGS PLC 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 404280AM1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC HLDGS PLC has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and 404280AM1 go up and down completely randomly.

Pair Corralation between Parker Hannifin and 404280AM1

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 1.09 times more return on investment than 404280AM1. However, Parker Hannifin is 1.09 times more volatile than HSBC HLDGS PLC. It trades about 0.17 of its potential returns per unit of risk. HSBC HLDGS PLC is currently generating about -0.04 per unit of risk. If you would invest  58,616  in Parker Hannifin on September 12, 2024 and sell it today you would earn a total of  9,177  from holding Parker Hannifin or generate 15.66% return on investment over 90 days.

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

Parker Hannifin  vs.  HSBC HLDGS PLC

Parker Hannifin

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal technical indicators, Parker Hannifin demonstrated solid returns over the last few months and may actually be approaching a breakup point.

HSBC HLDGS PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HSBC HLDGS PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 404280AM1 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 404280AM1

The main advantage of trading using opposite Parker Hannifin and 404280AM1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parker Hannifin position performs unexpectedly, 404280AM1 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 404280AM1 will offset losses from the drop in 404280AM1's long position.

The idea behind Parker Hannifin and HSBC HLDGS PLC 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.