Correlation Between Parker Hannifin and Compass Diversified
Can any of the company-specific risk be diversified away by investing in both Parker Hannifin and Compass Diversified 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 Compass Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parker Hannifin and Compass Diversified, you can compare the effects of market volatilities on Parker Hannifin and Compass Diversified 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 Compass Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parker Hannifin and Compass Diversified.
Diversification Opportunities for Parker Hannifin and Compass Diversified
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Parker and Compass is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Compass Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified 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 Compass Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Diversified has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Compass Diversified go up and down completely randomly.
Pair Corralation between Parker Hannifin and Compass Diversified
Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 5.53 times more return on investment than Compass Diversified. However, Parker Hannifin is 5.53 times more volatile than Compass Diversified. It trades about 0.28 of its potential returns per unit of risk. Compass Diversified is currently generating about -0.38 per unit of risk. If you would invest 62,218 in Parker Hannifin on August 28, 2024 and sell it today you would earn a total of 8,224 from holding Parker Hannifin or generate 13.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Parker Hannifin vs. Compass Diversified
Performance |
| Timeline |
| Parker Hannifin |
| Compass Diversified |
Parker Hannifin and Compass Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Parker Hannifin and Compass Diversified
The main advantage of trading using opposite Parker Hannifin and Compass Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parker Hannifin position performs unexpectedly, Compass Diversified 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 Compass Diversified will offset losses from the drop in Compass Diversified's long position.| Parker Hannifin vs. Illinois Tool Works | Parker Hannifin vs. Pentair PLC | Parker Hannifin vs. Emerson Electric | Parker Hannifin vs. Smith AO |
| Compass Diversified vs. Steel Partners Holdings | Compass Diversified vs. Steel Partners Holdings | Compass Diversified vs. Tejon Ranch Co | Compass Diversified vs. Brookfield Business Partners |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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