Correlation Between Parker Hannifin and Ambev SA

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

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

Diversification Opportunities for Parker Hannifin and Ambev SA

-0.58

Correlation Coefficient

Parker Hannifin  Ambev SA

Excellent diversification

The 3 months correlation between Parker and Ambev is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Ambev SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA ADR 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 Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA ADR has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Ambev SA go up and down completely randomly.

Pair Corralation between Parker Hannifin and Ambev SA

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 0.82 times more return on investment than Ambev SA. However, Parker Hannifin is 1.22 times less risky than Ambev SA. It trades about 0.07 of its potential returns per unit of risk. Ambev SA ADR is currently generating about -0.14 per unit of risk. If you would invest  63,773  in Parker Hannifin on September 20, 2024 and sell it today you would earn a total of  2,826  from holding Parker Hannifin or generate 4.43% return on investment over 90 days.

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

Parker Hannifin  vs.  Ambev SA ADR

Parker Hannifin

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal technical indicators, Parker Hannifin may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ambev SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambev SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Parker Hannifin and Ambev SA

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

The idea behind Parker Hannifin and Ambev SA ADR 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.