Correlation Between 3M and Parker Hannifin
Can any of the company-specific risk be diversified away by investing in both 3M 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 3M and Parker Hannifin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Parker Hannifin, you can compare the effects of market volatilities on 3M 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 3M with a short position of Parker Hannifin. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Parker Hannifin.
Diversification Opportunities for 3M and Parker Hannifin
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 3M and Parker is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Parker Hannifin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Hannifin and 3M 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 3M Company 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 3M i.e., 3M and Parker Hannifin go up and down completely randomly.
Pair Corralation between 3M and Parker Hannifin
Assuming the 90 days horizon 3M is expected to generate 1.77 times less return on investment than Parker Hannifin. In addition to that, 3M is 1.18 times more volatile than Parker Hannifin. It trades about 0.05 of its total potential returns per unit of risk. Parker Hannifin is currently generating about 0.11 per unit of volatility. If you would invest 37,768 in Parker Hannifin on September 3, 2024 and sell it today you would earn a total of 29,172 from holding Parker Hannifin or generate 77.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
3M Company vs. Parker Hannifin
Performance |
| Timeline |
| 3M Company |
| Parker Hannifin |
3M and Parker Hannifin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Parker Hannifin
The main advantage of trading using opposite 3M and Parker Hannifin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M 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.| 3M vs. Verizon Communications | 3M vs. MagnaChip Semiconductor Corp | 3M vs. ON SEMICONDUCTOR | 3M vs. China Communications Services |
| Parker Hannifin vs. LION ONE METALS | Parker Hannifin vs. Ares Management Corp | Parker Hannifin vs. EPSILON HEALTHCARE LTD | Parker Hannifin vs. CEOTRONICS |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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