Correlation Between Snap On and Parker Hannifin

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

By analyzing existing cross correlation between Snap On and Parker Hannifin, you can compare the effects of market volatilities on Snap On 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 Snap On with a short position of Parker Hannifin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap On and Parker Hannifin.

Diversification Opportunities for Snap On and Parker Hannifin

0.15

Correlation Coefficient

Snap On  Parker Hannifin

Average diversification

The 3 months correlation between Snap and Parker is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Snap On and Parker Hannifin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Hannifin and Snap On 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 Snap On 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 Snap On i.e., Snap On and Parker Hannifin go up and down completely randomly.

Pair Corralation between Snap On and Parker Hannifin

Considering the 90-day investment horizon Snap On is expected to under-perform the Parker Hannifin. In addition to that, Snap On is 1.81 times more volatile than Parker Hannifin. It trades about -0.14 of its total potential returns per unit of risk. Parker Hannifin is currently generating about -0.02 per unit of volatility. If you would invest  54,916  in Parker Hannifin on January 26, 2024 and sell it today you would lose (281.00) from holding Parker Hannifin or give up 0.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Snap On  vs.  Parker Hannifin

Snap On

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Snap On has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Snap On is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Parker Hannifin

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 14 (%) 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.

Pair Trading with Snap On and Parker Hannifin

The main advantage of trading using opposite Snap On and Parker Hannifin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap On 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 Snap On 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.