Correlation Between Parker Hannifin and ITT
Can any of the company-specific risk be diversified away by investing in both Parker Hannifin and ITT 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 ITT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parker Hannifin and ITT Inc, you can compare the effects of market volatilities on Parker Hannifin and ITT 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 ITT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parker Hannifin and ITT.
Diversification Opportunities for Parker Hannifin and ITT
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Parker and ITT is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and ITT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITT Inc 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 ITT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITT Inc has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and ITT go up and down completely randomly.
Pair Corralation between Parker Hannifin and ITT
Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 1.06 times more return on investment than ITT. However, Parker Hannifin is 1.06 times more volatile than ITT Inc. It trades about 0.13 of its potential returns per unit of risk. ITT Inc is currently generating about 0.11 per unit of risk. If you would invest 32,578 in Parker Hannifin on August 27, 2024 and sell it today you would earn a total of 38,109 from holding Parker Hannifin or generate 116.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Parker Hannifin vs. ITT Inc
Performance |
| Timeline |
| Parker Hannifin |
| ITT Inc |
Parker Hannifin and ITT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Parker Hannifin and ITT
The main advantage of trading using opposite Parker Hannifin and ITT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parker Hannifin position performs unexpectedly, ITT 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 ITT will offset losses from the drop in ITT's long position.| Parker Hannifin vs. Aquagold International | Parker Hannifin vs. Morningstar Unconstrained Allocation | Parker Hannifin vs. High Yield Municipal Fund | Parker Hannifin vs. Thrivent High Yield |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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