Correlation Between Donaldson and Ingersoll Rand

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

By analyzing existing cross correlation between Donaldson and Ingersoll Rand, you can compare the effects of market volatilities on Donaldson and Ingersoll Rand 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 Donaldson with a short position of Ingersoll Rand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Donaldson and Ingersoll Rand.

Diversification Opportunities for Donaldson and Ingersoll Rand

0.43

Correlation Coefficient

Donaldson  Ingersoll Rand

Very weak diversification

The 3 months correlation between Donaldson and Ingersoll is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Donaldson and Ingersoll Rand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ingersoll Rand and Donaldson 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 Donaldson are associated (or correlated) with Ingersoll Rand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ingersoll Rand has no effect on the direction of Donaldson i.e., Donaldson and Ingersoll Rand go up and down completely randomly.

Pair Corralation between Donaldson and Ingersoll Rand

Considering the 90-day investment horizon Donaldson is expected to generate 0.7 times more return on investment than Ingersoll Rand. However, Donaldson is 1.42 times less risky than Ingersoll Rand. It trades about 0.01 of its potential returns per unit of risk. Ingersoll Rand is currently generating about -0.11 per unit of risk. If you would invest  6,702  in Donaldson on December 30, 2024 and sell it today you would earn a total of  5.00  from holding Donaldson or generate 0.07% return on investment over 90 days.

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

Donaldson  vs.  Ingersoll Rand

Donaldson

Risk-Adjusted Performance

Very Weak

Over the last 90 days Donaldson has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Donaldson is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Ingersoll Rand

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ingersoll Rand has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Donaldson and Ingersoll Rand

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

The idea behind Donaldson and Ingersoll Rand 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.