Correlation Between VULCAN MATERIALS and Parker Hannifin

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

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

Diversification Opportunities for VULCAN MATERIALS and Parker Hannifin

0.87

Correlation Coefficient

VULCAN MATERIALS  Parker Hannifin

Very poor diversification

The 3 months correlation between VULCAN and Parker is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and Parker Hannifin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Hannifin and VULCAN MATERIALS 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 VULCAN MATERIALS are associated (or correlated) with Parker Hannifin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parker Hannifin has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and Parker Hannifin go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and Parker Hannifin

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to under-perform the Parker Hannifin. In addition to that, VULCAN MATERIALS is 1.23 times more volatile than Parker Hannifin. It trades about -0.31 of its total potential returns per unit of risk. Parker Hannifin is currently generating about -0.28 per unit of volatility. If you would invest  64,520  in Parker Hannifin on October 11, 2024 and sell it today you would lose (3,060) from holding Parker Hannifin or give up 4.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.44%
Values	Daily Returns

VULCAN MATERIALS  vs.  Parker Hannifin

VULCAN MATERIALS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VULCAN MATERIALS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VULCAN MATERIALS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Parker Hannifin

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Parker Hannifin may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with VULCAN MATERIALS and Parker Hannifin

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

The idea behind VULCAN MATERIALS and Parker Hannifin 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.