Correlation Between Parker Hannifin and Stepan
Can any of the company-specific risk be diversified away by investing in both Parker Hannifin and Stepan 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 Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parker Hannifin and Stepan Company, you can compare the effects of market volatilities on Parker Hannifin and Stepan 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 Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parker Hannifin and Stepan.
Diversification Opportunities for Parker Hannifin and Stepan
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Parker and Stepan is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Stepan go up and down completely randomly.
Pair Corralation between Parker Hannifin and Stepan
Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 0.88 times more return on investment than Stepan. However, Parker Hannifin is 1.14 times less risky than Stepan. It trades about 0.25 of its potential returns per unit of risk. Stepan Company is currently generating about 0.09 per unit of risk. If you would invest 62,363 in Parker Hannifin on August 30, 2024 and sell it today you would earn a total of 7,625 from holding Parker Hannifin or generate 12.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Parker Hannifin vs. Stepan Company
Performance |
| Timeline |
| Parker Hannifin |
| Stepan Company |
Parker Hannifin and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Parker Hannifin and Stepan
The main advantage of trading using opposite Parker Hannifin and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parker Hannifin position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan's long position.| Parker Hannifin vs. Illinois Tool Works | Parker Hannifin vs. Pentair PLC | Parker Hannifin vs. Emerson Electric | Parker Hannifin vs. Smith AO |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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