Correlation Between Hillenbrand and ITT

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

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

Diversification Opportunities for Hillenbrand and ITT

0.93

Correlation Coefficient

Hillenbrand  ITT

Almost no diversification

The 3 months correlation between Hillenbrand and ITT is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Hillenbrand and ITT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITT Inc and Hillenbrand 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 Hillenbrand are associated (or correlated) with ITT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITT Inc has no effect on the direction of Hillenbrand i.e., Hillenbrand and ITT go up and down completely randomly.

Pair Corralation between Hillenbrand and ITT

Allowing for the 90-day total investment horizon Hillenbrand is expected to under-perform the ITT. In addition to that, Hillenbrand is 1.57 times more volatile than ITT Inc. It trades about -0.09 of its total potential returns per unit of risk. ITT Inc is currently generating about -0.04 per unit of volatility. If you would invest  14,164  in ITT Inc on December 28, 2024 and sell it today you would lose (758.00) from holding ITT Inc or give up 5.35% of portfolio value over 90 days.

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

Hillenbrand  vs.  ITT Inc

Hillenbrand

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hillenbrand has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

ITT Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ITT is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hillenbrand and ITT

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

The idea behind Hillenbrand and ITT Inc 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.