Correlation Between Parker Hannifin and American Superconductor
Can any of the company-specific risk be diversified away by investing in both Parker Hannifin and American Superconductor 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 American Superconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parker Hannifin and American Superconductor, you can compare the effects of market volatilities on Parker Hannifin and American Superconductor 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 American Superconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parker Hannifin and American Superconductor.
Diversification Opportunities for Parker Hannifin and American Superconductor
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Parker and American is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and American Superconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Superconductor 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 American Superconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Superconductor has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and American Superconductor go up and down completely randomly.
Pair Corralation between Parker Hannifin and American Superconductor
Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 2.02 times less return on investment than American Superconductor. But when comparing it to its historical volatility, Parker Hannifin is 3.03 times less risky than American Superconductor. It trades about 0.24 of its potential returns per unit of risk. American Superconductor is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 2,854 in American Superconductor on September 2, 2024 and sell it today you would earn a total of 552.00 from holding American Superconductor or generate 19.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Parker Hannifin vs. American Superconductor
Performance |
| Timeline |
| Parker Hannifin |
| American Superconductor |
Parker Hannifin and American Superconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Parker Hannifin and American Superconductor
The main advantage of trading using opposite Parker Hannifin and American Superconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parker Hannifin position performs unexpectedly, American Superconductor 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 American Superconductor will offset losses from the drop in American Superconductor's long position.The idea behind Parker Hannifin and American Superconductor 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.| American Superconductor vs. Nel ASA | American Superconductor vs. Graham | American Superconductor vs. Watts Water Technologies | American Superconductor vs. CVD Equipment |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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