Correlation Between Brockhaus Capital and Illinois Tool

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

By analyzing existing cross correlation between Brockhaus Capital Management and Illinois Tool Works, you can compare the effects of market volatilities on Brockhaus Capital and Illinois Tool 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 Brockhaus Capital with a short position of Illinois Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brockhaus Capital and Illinois Tool.

Diversification Opportunities for Brockhaus Capital and Illinois Tool

-0.88

Correlation Coefficient

Brockhaus Capital  Illinois Tool

Pay attention - limited upside

The 3 months correlation between Brockhaus and Illinois is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Brockhaus Capital Management and Illinois Tool Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illinois Tool Works and Brockhaus Capital 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 Brockhaus Capital Management are associated (or correlated) with Illinois Tool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illinois Tool Works has no effect on the direction of Brockhaus Capital i.e., Brockhaus Capital and Illinois Tool go up and down completely randomly.

Pair Corralation between Brockhaus Capital and Illinois Tool

Assuming the 90 days trading horizon Brockhaus Capital is expected to generate 1.09 times less return on investment than Illinois Tool. In addition to that, Brockhaus Capital is 2.8 times more volatile than Illinois Tool Works. It trades about 0.01 of its total potential returns per unit of risk. Illinois Tool Works is currently generating about 0.03 per unit of volatility. If you would invest  22,841  in Illinois Tool Works on October 5, 2024 and sell it today you would earn a total of  1,579  from holding Illinois Tool Works or generate 6.91% return on investment over 90 days.

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

Brockhaus Capital Management  vs.  Illinois Tool Works

Brockhaus Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brockhaus Capital Management 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 technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Illinois Tool Works

Risk-Adjusted Performance

0 of 100

Modest

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

Pair Trading with Brockhaus Capital and Illinois Tool

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

The idea behind Brockhaus Capital Management and Illinois Tool Works 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 Global Correlations module to find global opportunities by holding instruments from different markets.