Correlation Between Parker Hannifin and KNOT Offshore

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

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

Diversification Opportunities for Parker Hannifin and KNOT Offshore

-0.49

Correlation Coefficient

Parker Hannifin  KNOT Offshore

Very good diversification

The 3 months correlation between Parker and KNOT is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and KNOT Offshore Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNOT Offshore Partners 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 KNOT Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNOT Offshore Partners has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and KNOT Offshore go up and down completely randomly.

Pair Corralation between Parker Hannifin and KNOT Offshore

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 0.68 times more return on investment than KNOT Offshore. However, Parker Hannifin is 1.47 times less risky than KNOT Offshore. It trades about -0.4 of its potential returns per unit of risk. KNOT Offshore Partners is currently generating about -0.32 per unit of risk. If you would invest  70,442  in Parker Hannifin on September 26, 2024 and sell it today you would lose (5,877) from holding Parker Hannifin or give up 8.34% of portfolio value over 90 days.

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

Parker Hannifin  vs.  KNOT Offshore Partners

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.

KNOT Offshore Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KNOT Offshore Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Parker Hannifin and KNOT Offshore

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

The idea behind Parker Hannifin and KNOT Offshore Partners 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.