Correlation Between Parker Hannifin and Compagnie Plastic

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

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

Diversification Opportunities for Parker Hannifin and Compagnie Plastic

0.11

Correlation Coefficient

Parker Hannifin  Compagnie Plastic

Average diversification

The 3 months correlation between Parker and Compagnie is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Compagnie Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Plastic Omnium 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 Compagnie Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Plastic Omnium has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Compagnie Plastic go up and down completely randomly.

Pair Corralation between Parker Hannifin and Compagnie Plastic

Assuming the 90 days horizon Parker Hannifin is expected to generate 1.31 times more return on investment than Compagnie Plastic. However, Parker Hannifin is 1.31 times more volatile than Compagnie Plastic Omnium. It trades about 0.2 of its potential returns per unit of risk. Compagnie Plastic Omnium is currently generating about -0.06 per unit of risk. If you would invest  58,570  in Parker Hannifin on September 4, 2024 and sell it today you would earn a total of  7,810  from holding Parker Hannifin or generate 13.33% 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.  Compagnie Plastic Omnium

Parker Hannifin

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 15 (%) 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.

Compagnie Plastic Omnium

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Plastic Omnium are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Compagnie Plastic is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Parker Hannifin and Compagnie Plastic

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

The idea behind Parker Hannifin and Compagnie Plastic Omnium 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.