Correlation Between Ingersoll Rand and Parker Hannifin
Can any of the company-specific risk be diversified away by investing in both Ingersoll Rand 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 Ingersoll Rand and Parker Hannifin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ingersoll Rand and Parker Hannifin, you can compare the effects of market volatilities on Ingersoll Rand 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 Ingersoll Rand with a short position of Parker Hannifin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ingersoll Rand and Parker Hannifin.
Diversification Opportunities for Ingersoll Rand and Parker Hannifin
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Ingersoll and Parker is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Ingersoll Rand and Parker Hannifin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Hannifin and Ingersoll Rand 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 Ingersoll Rand 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 Ingersoll Rand i.e., Ingersoll Rand and Parker Hannifin go up and down completely randomly.
Pair Corralation between Ingersoll Rand and Parker Hannifin
Allowing for the 90-day total investment horizon Ingersoll Rand is expected to generate 1.13 times more return on investment than Parker Hannifin. However, Ingersoll Rand is 1.13 times more volatile than Parker Hannifin. It trades about -0.01 of its potential returns per unit of risk. Parker Hannifin is currently generating about -0.04 per unit of risk. If you would invest 9,362 in Ingersoll Rand on February 1, 2024 and sell it today you would lose (30.00) from holding Ingersoll Rand or give up 0.32% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Ingersoll Rand vs. Parker Hannifin
Performance |
Timeline |
Ingersoll Rand |
Parker Hannifin |
Ingersoll Rand and Parker Hannifin Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ingersoll Rand and Parker Hannifin
The main advantage of trading using opposite Ingersoll Rand and Parker Hannifin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ingersoll Rand 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 Ingersoll Rand 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 Stocks Directory module to find actively traded stocks across global markets.
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