Correlation Between Nike and Parker Hannifin
Can any of the company-specific risk be diversified away by investing in both Nike 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 Nike and Parker Hannifin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Parker Hannifin, you can compare the effects of market volatilities on Nike 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 Nike with a short position of Parker Hannifin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Parker Hannifin.
Diversification Opportunities for Nike and Parker Hannifin
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nike and Parker is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Parker Hannifin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Hannifin and Nike 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 Nike 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 Nike i.e., Nike and Parker Hannifin go up and down completely randomly.
Pair Corralation between Nike and Parker Hannifin
Considering the 90-day investment horizon Nike Inc is expected to under-perform the Parker Hannifin. In addition to that, Nike is 1.32 times more volatile than Parker Hannifin. It trades about -0.06 of its total potential returns per unit of risk. Parker Hannifin is currently generating about 0.13 per unit of volatility. If you would invest 43,345 in Parker Hannifin on September 4, 2024 and sell it today you would earn a total of 26,724 from holding Parker Hannifin or generate 61.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Nike Inc vs. Parker Hannifin
Performance |
| Timeline |
| Nike Inc |
| Parker Hannifin |
Nike and Parker Hannifin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Parker Hannifin
The main advantage of trading using opposite Nike and Parker Hannifin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike 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 Nike 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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