Correlation Between Illinois Tool and GOODYEAR T
Can any of the company-specific risk be diversified away by investing in both Illinois Tool and GOODYEAR T 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 Illinois Tool and GOODYEAR T into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Illinois Tool Works and GOODYEAR T RUBBER, you can compare the effects of market volatilities on Illinois Tool and GOODYEAR T 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 Illinois Tool with a short position of GOODYEAR T. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illinois Tool and GOODYEAR T.
Diversification Opportunities for Illinois Tool and GOODYEAR T
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Illinois and GOODYEAR is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and GOODYEAR T RUBBER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOODYEAR T RUBBER and Illinois Tool 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 Illinois Tool Works are associated (or correlated) with GOODYEAR T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOODYEAR T RUBBER has no effect on the direction of Illinois Tool i.e., Illinois Tool and GOODYEAR T go up and down completely randomly.
Pair Corralation between Illinois Tool and GOODYEAR T
Assuming the 90 days horizon Illinois Tool Works is expected to generate 0.32 times more return on investment than GOODYEAR T. However, Illinois Tool Works is 3.16 times less risky than GOODYEAR T. It trades about -0.26 of its potential returns per unit of risk. GOODYEAR T RUBBER is currently generating about -0.27 per unit of risk. If you would invest 26,430 in Illinois Tool Works on September 25, 2024 and sell it today you would lose (1,350) from holding Illinois Tool Works or give up 5.11% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Illinois Tool Works vs. GOODYEAR T RUBBER
Performance |
Timeline |
Illinois Tool Works |
GOODYEAR T RUBBER |
Illinois Tool and GOODYEAR T Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Illinois Tool and GOODYEAR T
The main advantage of trading using opposite Illinois Tool and GOODYEAR T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Illinois Tool position performs unexpectedly, GOODYEAR T 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 GOODYEAR T will offset losses from the drop in GOODYEAR T's long position.Illinois Tool vs. GOODYEAR T RUBBER | Illinois Tool vs. bet at home AG | Illinois Tool vs. Vulcan Materials | Illinois Tool vs. MI Homes |
Check out your portfolio center.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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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