Correlation Between Parker Hannifin and Viemed Healthcare

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

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

Diversification Opportunities for Parker Hannifin and Viemed Healthcare

0.46

Correlation Coefficient

Parker Hannifin  Viemed Healthcare

Very weak diversification

The 3 months correlation between Parker and Viemed is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Viemed Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viemed Healthcare 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 Viemed Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viemed Healthcare has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Viemed Healthcare go up and down completely randomly.

Pair Corralation between Parker Hannifin and Viemed Healthcare

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 0.79 times more return on investment than Viemed Healthcare. However, Parker Hannifin is 1.27 times less risky than Viemed Healthcare. It trades about -0.07 of its potential returns per unit of risk. Viemed Healthcare is currently generating about -0.08 per unit of risk. If you would invest  70,124  in Parker Hannifin on November 29, 2024 and sell it today you would lose (4,407) from holding Parker Hannifin or give up 6.28% of portfolio value over 90 days.

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

Parker Hannifin  vs.  Viemed Healthcare

Parker Hannifin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parker Hannifin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Viemed Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Viemed Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile 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 Viemed Healthcare

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

The idea behind Parker Hannifin and Viemed Healthcare 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.