Correlation Between Parker Hannifin and Vestas Wind

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

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

Diversification Opportunities for Parker Hannifin and Vestas Wind

-0.89

Correlation Coefficient

Parker Hannifin  Vestas Wind

Pay attention - limited upside

The 3 months correlation between Parker and Vestas is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Vestas Wind go up and down completely randomly.

Pair Corralation between Parker Hannifin and Vestas Wind

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 0.43 times more return on investment than Vestas Wind. However, Parker Hannifin is 2.31 times less risky than Vestas Wind. It trades about 0.22 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.16 per unit of risk. If you would invest  57,559  in Parker Hannifin on September 4, 2024 and sell it today you would earn a total of  12,510  from holding Parker Hannifin or generate 21.73% return on investment over 90 days.

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

Parker Hannifin  vs.  Vestas Wind Systems

Parker Hannifin

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal technical indicators, Parker Hannifin demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Vestas Wind Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestas Wind Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Parker Hannifin and Vestas Wind

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

The idea behind Parker Hannifin and Vestas Wind Systems 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.