Correlation Between Standex International and Parker Hannifin
Can any of the company-specific risk be diversified away by investing in both Standex International and Parker Hannifin 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 Standex International and Parker Hannifin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standex International and Parker Hannifin, you can compare the effects of market volatilities on Standex International and Parker Hannifin 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 Standex International with a short position of Parker Hannifin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standex International and Parker Hannifin.
Diversification Opportunities for Standex International and Parker Hannifin
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Standex and Parker is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Standex International and Parker Hannifin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Hannifin and Standex International 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 Standex International are associated (or correlated) with Parker Hannifin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parker Hannifin has no effect on the direction of Standex International i.e., Standex International and Parker Hannifin go up and down completely randomly.
Pair Corralation between Standex International and Parker Hannifin
Considering the 90-day investment horizon Standex International is expected to generate 1.25 times less return on investment than Parker Hannifin. In addition to that, Standex International is 1.04 times more volatile than Parker Hannifin. It trades about 0.11 of its total potential returns per unit of risk. Parker Hannifin is currently generating about 0.14 per unit of volatility. If you would invest 50,983 in Parker Hannifin on September 2, 2024 and sell it today you would earn a total of 19,307 from holding Parker Hannifin or generate 37.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standex International vs. Parker Hannifin
Performance |
| Timeline |
| Standex International |
| Parker Hannifin |
Standex International and Parker Hannifin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standex International and Parker Hannifin
The main advantage of trading using opposite Standex International and Parker Hannifin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standex International position performs unexpectedly, Parker Hannifin 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 Parker Hannifin will offset losses from the drop in Parker Hannifin's long position.The idea behind Standex International and Parker Hannifin 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.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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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