Correlation Between Parker Hannifin and Trane Technologies

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

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

Diversification Opportunities for Parker Hannifin and Trane Technologies

0.94

Correlation Coefficient

Parker Hannifin  Trane Technologies

Almost no diversification

The 3 months correlation between Parker and Trane is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Trane Technologies plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trane Technologies plc 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 Trane Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trane Technologies plc has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Trane Technologies go up and down completely randomly.

Pair Corralation between Parker Hannifin and Trane Technologies

Assuming the 90 days horizon Parker Hannifin is expected to generate 1.34 times more return on investment than Trane Technologies. However, Parker Hannifin is 1.34 times more volatile than Trane Technologies plc. It trades about 0.15 of its potential returns per unit of risk. Trane Technologies plc is currently generating about 0.17 per unit of risk. If you would invest  54,401  in Parker Hannifin on August 31, 2024 and sell it today you would earn a total of  12,319  from holding Parker Hannifin or generate 22.64% return on investment over 90 days.

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

Parker Hannifin  vs.  Trane Technologies plc

Parker Hannifin

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Parker Hannifin reported solid returns over the last few months and may actually be approaching a breakup point.

Trane Technologies plc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trane Technologies plc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Trane Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Parker Hannifin and Trane Technologies

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

The idea behind Parker Hannifin and Trane Technologies plc 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.