Correlation Between ITT and Parker Hannifin
Can any of the company-specific risk be diversified away by investing in both ITT 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 ITT and Parker Hannifin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITT Inc and Parker Hannifin, you can compare the effects of market volatilities on ITT 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 ITT with a short position of Parker Hannifin. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITT and Parker Hannifin.
Diversification Opportunities for ITT and Parker Hannifin
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ITT and Parker is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ITT Inc and Parker Hannifin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Hannifin and ITT 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 ITT Inc 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 ITT i.e., ITT and Parker Hannifin go up and down completely randomly.
Pair Corralation between ITT and Parker Hannifin
Considering the 90-day investment horizon ITT Inc is expected to under-perform the Parker Hannifin. In addition to that, ITT is 1.15 times more volatile than Parker Hannifin. It trades about -0.33 of its total potential returns per unit of risk. Parker Hannifin is currently generating about -0.34 per unit of volatility. If you would invest 68,257 in Parker Hannifin on October 13, 2024 and sell it today you would lose (5,253) from holding Parker Hannifin or give up 7.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITT Inc vs. Parker Hannifin
Performance |
| Timeline |
| ITT Inc |
| Parker Hannifin |
ITT and Parker Hannifin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITT and Parker Hannifin
The main advantage of trading using opposite ITT and Parker Hannifin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITT 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 ITT Inc 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.| Parker Hannifin vs. Illinois Tool Works | Parker Hannifin vs. Pentair PLC | Parker Hannifin vs. Emerson Electric | Parker Hannifin vs. Smith AO |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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