Correlation Between CF Industries and Parker Hannifin
Can any of the company-specific risk be diversified away by investing in both CF Industries 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 CF Industries and Parker Hannifin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CF Industries Holdings and Parker Hannifin, you can compare the effects of market volatilities on CF Industries 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 CF Industries with a short position of Parker Hannifin. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Parker Hannifin.
Diversification Opportunities for CF Industries and Parker Hannifin
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CF Industries and Parker is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Parker Hannifin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Hannifin and CF Industries 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 CF Industries Holdings 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 CF Industries i.e., CF Industries and Parker Hannifin go up and down completely randomly.
Pair Corralation between CF Industries and Parker Hannifin
Allowing for the 90-day total investment horizon CF Industries Holdings is expected to generate 2.0 times more return on investment than Parker Hannifin. However, CF Industries is 2.0 times more volatile than Parker Hannifin. It trades about 0.18 of its potential returns per unit of risk. Parker Hannifin is currently generating about -0.2 per unit of risk. If you would invest 8,471 in CF Industries Holdings on September 14, 2024 and sell it today you would earn a total of 511.00 from holding CF Industries Holdings or generate 6.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CF Industries Holdings vs. Parker Hannifin
Performance |
| Timeline |
| CF Industries Holdings |
| Parker Hannifin |
CF Industries and Parker Hannifin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Industries and Parker Hannifin
The main advantage of trading using opposite CF Industries and Parker Hannifin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries 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.| CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals | CF Industries vs. The Mosaic |
| Parker Hannifin vs. Hurco Companies | Parker Hannifin vs. Enerpac Tool Group | Parker Hannifin vs. China Yuchai International | Parker Hannifin vs. Luxfer Holdings PLC |
Check out your portfolio center.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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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