Correlation Between Parker Hannifin and Manulife Financial

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

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

Diversification Opportunities for Parker Hannifin and Manulife Financial

-0.05

Correlation Coefficient

Parker Hannifin  Manulife Financial

Good diversification

The 3 months correlation between Parker and Manulife is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Manulife Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Financial 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 Manulife Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Financial has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Manulife Financial go up and down completely randomly.

Pair Corralation between Parker Hannifin and Manulife Financial

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 1.54 times more return on investment than Manulife Financial. However, Parker Hannifin is 1.54 times more volatile than Manulife Financial. It trades about 0.03 of its potential returns per unit of risk. Manulife Financial is currently generating about -0.09 per unit of risk. If you would invest  63,390  in Parker Hannifin on September 26, 2024 and sell it today you would earn a total of  1,175  from holding Parker Hannifin or generate 1.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Parker Hannifin  vs.  Manulife Financial

Parker Hannifin

Risk-Adjusted Performance

2 of 100

Insignificant

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.

Manulife Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manulife Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Manulife Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Parker Hannifin and Manulife Financial

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

The idea behind Parker Hannifin and Manulife Financial 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.