Correlation Between Parker Hannifin and GE Aerospace

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

Diversification Opportunities for Parker Hannifin and GE Aerospace

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Parker and GE Aerospace is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace 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 GE Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Aerospace has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and GE Aerospace go up and down completely randomly.

Pair Corralation between Parker Hannifin and GE Aerospace

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 9.17 times less return on investment than GE Aerospace. But when comparing it to its historical volatility, Parker Hannifin is 2.07 times less risky than GE Aerospace. It trades about 0.06 of its potential returns per unit of risk. GE Aerospace is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  13,536  in GE Aerospace on January 17, 2024 and sell it today you would earn a total of  1,834  from holding GE Aerospace or generate 13.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Parker Hannifin  vs.  GE Aerospace

 Performance 
       Timeline  
Parker Hannifin 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal technical indicators, Parker Hannifin demonstrated solid returns over the last few months and may actually be approaching a breakup point.
GE Aerospace 

Risk-Adjusted Performance

31 of 100

 
Weak
 
Strong
Very Strong
Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, GE Aerospace exhibited solid returns over the last few months and may actually be approaching a breakup point.

Parker Hannifin and GE Aerospace Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Parker Hannifin and GE Aerospace

The main advantage of trading using opposite Parker Hannifin and GE Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parker Hannifin position performs unexpectedly, GE Aerospace 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 GE Aerospace will offset losses from the drop in GE Aerospace's long position.
The idea behind Parker Hannifin and GE Aerospace 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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