Correlation Between Parker Hannifin and EMCOR

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

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

Diversification Opportunities for Parker Hannifin and EMCOR

0.97

Correlation Coefficient

Parker Hannifin  EMCOR

Almost no diversification

The 3 months correlation between Parker and EMCOR is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group 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 EMCOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCOR Group has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and EMCOR go up and down completely randomly.

Pair Corralation between Parker Hannifin and EMCOR

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 0.43 times more return on investment than EMCOR. However, Parker Hannifin is 2.34 times less risky than EMCOR. It trades about -0.21 of its potential returns per unit of risk. EMCOR Group is currently generating about -0.11 per unit of risk. If you would invest  69,168  in Parker Hannifin on September 19, 2024 and sell it today you would lose (2,569) from holding Parker Hannifin or give up 3.71% of portfolio value over 90 days.

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

Parker Hannifin  vs.  EMCOR Group

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.

EMCOR Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, EMCOR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Parker Hannifin and EMCOR

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

The idea behind Parker Hannifin and EMCOR Group 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.