Correlation Between Parker Hannifin and Smith AO
Can any of the company-specific risk be diversified away by investing in both Parker Hannifin and Smith AO 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 Smith AO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parker Hannifin and Smith AO, you can compare the effects of market volatilities on Parker Hannifin and Smith AO 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 Smith AO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parker Hannifin and Smith AO.
Diversification Opportunities for Parker Hannifin and Smith AO
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Parker and Smith is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Smith AO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith AO 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 Smith AO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith AO has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Smith AO go up and down completely randomly.
Pair Corralation between Parker Hannifin and Smith AO
Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 2.41 times more return on investment than Smith AO. However, Parker Hannifin is 2.41 times more volatile than Smith AO. It trades about 0.25 of its potential returns per unit of risk. Smith AO is currently generating about -0.27 per unit of risk. If you would invest 62,821 in Parker Hannifin on August 24, 2024 and sell it today you would earn a total of 7,447 from holding Parker Hannifin or generate 11.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Parker Hannifin vs. Smith AO
Performance |
| Timeline |
| Parker Hannifin |
| Smith AO |
Parker Hannifin and Smith AO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Parker Hannifin and Smith AO
The main advantage of trading using opposite Parker Hannifin and Smith AO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parker Hannifin position performs unexpectedly, Smith AO 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 Smith AO will offset losses from the drop in Smith AO's long position.| Parker Hannifin vs. Illinois Tool Works | Parker Hannifin vs. Pentair PLC | Parker Hannifin vs. Emerson Electric | Parker Hannifin vs. Smith AO |
| Smith AO vs. Dover | Smith AO vs. Illinois Tool Works | Smith AO vs. Xylem Inc | Smith AO vs. Franklin Electric Co |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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