Correlation Between Parker Hannifin and 3M
Can any of the company-specific risk be diversified away by investing in both Parker Hannifin and 3M 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 Parker Hannifin and 3M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parker Hannifin and 3M Company, you can compare the effects of market volatilities on Parker Hannifin and 3M 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 Parker Hannifin with a short position of 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parker Hannifin and 3M.
Diversification Opportunities for Parker Hannifin and 3M
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Parker and 3M is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and Parker Hannifin 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 Parker Hannifin are associated (or correlated) with 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and 3M go up and down completely randomly.
Pair Corralation between Parker Hannifin and 3M
Assuming the 90 days horizon Parker Hannifin is expected to under-perform the 3M. But the stock apears to be less risky and, when comparing its historical volatility, Parker Hannifin is 1.13 times less risky than 3M. The stock trades about -0.11 of its potential returns per unit of risk. The 3M Company is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 12,180 in 3M Company on September 13, 2024 and sell it today you would earn a total of 122.00 from holding 3M Company or generate 1.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Parker Hannifin vs. 3M Company
Performance |
| Timeline |
| Parker Hannifin |
| 3M Company |
Parker Hannifin and 3M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Parker Hannifin and 3M
The main advantage of trading using opposite Parker Hannifin and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parker Hannifin position performs unexpectedly, 3M 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 3M will offset losses from the drop in 3M's long position.| Parker Hannifin vs. CDN IMPERIAL BANK | Parker Hannifin vs. International Game Technology | Parker Hannifin vs. BANKINTER ADR 2007 | Parker Hannifin vs. PT Bank Maybank |
| 3M vs. Motorcar Parts of | 3M vs. Cogent Communications Holdings | 3M vs. Zoom Video Communications | 3M vs. Carsales |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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