Correlation Between SPX Corp and Parker-Hannifin Corp

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Can any of the company-specific risk be diversified away by investing in both SPX Corp and Parker-Hannifin Corp 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 SPX Corp and Parker-Hannifin Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPX Corp and Parker-Hannifin Corp, you can compare the effects of market volatilities on SPX Corp and Parker-Hannifin Corp 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 SPX Corp with a short position of Parker-Hannifin Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPX Corp and Parker-Hannifin Corp.

Diversification Opportunities for SPX Corp and Parker-Hannifin Corp

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between SPX Corp and Parker-Hannifin is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding SPX Corp and Parker-Hannifin Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker-Hannifin Corp and SPX Corp 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 SPX Corp are associated (or correlated) with Parker-Hannifin Corp. 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 Corp has no effect on the direction of SPX Corp i.e., SPX Corp and Parker-Hannifin Corp go up and down completely randomly.

Pair Corralation between SPX Corp and Parker-Hannifin Corp

Given the investment horizon of 90 days SPX Corp is expected to generate 1.63 times less return on investment than Parker-Hannifin Corp. In addition to that, SPX Corp is 1.4 times more volatile than Parker-Hannifin Corp. It trades about 0.24 of its total potential returns per unit of risk. Parker-Hannifin Corp is currently generating about 0.55 per unit of volatility. If you would invest  24,805  in Parker-Hannifin Corp on May 11, 2022 and sell it today you would earn a total of  4,450  from holding Parker-Hannifin Corp or generate 17.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

SPX Corp  vs.  Parker-Hannifin Corp

 Performance (%) 
       Timeline  
SPX Corp 
SPX Corp Performance
19 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in SPX Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SPX Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

SPX Corp Price Channel

Parker-Hannifin Corp 
Parker-Hannifin Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Parker-Hannifin Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Parker-Hannifin Corp may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Parker-Hannifin Price Channel

SPX Corp and Parker-Hannifin Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SPX Corp and Parker-Hannifin Corp

The main advantage of trading using opposite SPX Corp and Parker-Hannifin Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPX Corp position performs unexpectedly, Parker-Hannifin Corp 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 Corp will offset losses from the drop in Parker-Hannifin Corp's long position.
The idea behind SPX Corp and Parker-Hannifin Corp 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 Piotroski F Score module to get Piotroski F Score based on binary analysis strategy of nine different fundamentals.

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