Correlation Between Parker Hannifin and Estee Lauder

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

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

Diversification Opportunities for Parker Hannifin and Estee Lauder

-0.73

Correlation Coefficient

Parker Hannifin  Estee Lauder

Pay attention - limited upside

The 3 months correlation between Parker and Estee is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Estee Lauder Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Estee Lauder Companies 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 Estee Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Estee Lauder Companies has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Estee Lauder go up and down completely randomly.

Pair Corralation between Parker Hannifin and Estee Lauder

Allowing for the 90-day total investment horizon Parker Hannifin is expected to under-perform the Estee Lauder. But the stock apears to be less risky and, when comparing its historical volatility, Parker Hannifin is 1.99 times less risky than Estee Lauder. The stock trades about -0.4 of its potential returns per unit of risk. The Estee Lauder Companies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,262  in Estee Lauder Companies on September 26, 2024 and sell it today you would earn a total of  213.00  from holding Estee Lauder Companies or generate 2.93% return on investment over 90 days.

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

Parker Hannifin  vs.  Estee Lauder Companies

Parker Hannifin

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Parker Hannifin is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Estee Lauder Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Estee Lauder Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Parker Hannifin and Estee Lauder

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

The idea behind Parker Hannifin and Estee Lauder Companies 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.