Correlation Between Parker Hannifin and NH Foods

Can any of the company-specific risk be diversified away by investing in both Parker Hannifin and NH Foods 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 NH Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Parker Hannifin and NH Foods Ltd, you can compare the effects of market volatilities on Parker Hannifin and NH Foods 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 NH Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parker Hannifin and NH Foods.

Diversification Opportunities for Parker Hannifin and NH Foods

0.12

Correlation Coefficient

Parker Hannifin  NH Foods

Average diversification

The 3 months correlation between Parker and NIPMY is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and NH Foods Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Foods 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 NH Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH Foods has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and NH Foods go up and down completely randomly.

Pair Corralation between Parker Hannifin and NH Foods

Allowing for the 90-day total investment horizon Parker Hannifin is expected to under-perform the NH Foods. But the stock apears to be less risky and, when comparing its historical volatility, Parker Hannifin is 1.59 times less risky than NH Foods. The stock trades about -0.02 of its potential returns per unit of risk. The NH Foods Ltd is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,510  in NH Foods Ltd on January 25, 2024 and sell it today you would earn a total of  115.00  from holding NH Foods Ltd or generate 7.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Parker Hannifin  vs.  NH Foods Ltd

Parker Hannifin

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 13 (%) 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.

NH Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NH Foods Ltd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, NH Foods may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Parker Hannifin and NH Foods

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

The idea behind Parker Hannifin and NH Foods Ltd 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.