Correlation Between Ingersoll Rand and Cummins

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

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

Diversification Opportunities for Ingersoll Rand and Cummins

0.53

Correlation Coefficient

Ingersoll Rand  Cummins

Very weak diversification

The 3 months correlation between Ingersoll and Cummins is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ingersoll Rand and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins and Ingersoll Rand 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 Ingersoll Rand are associated (or correlated) with Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of Ingersoll Rand i.e., Ingersoll Rand and Cummins go up and down completely randomly.

Pair Corralation between Ingersoll Rand and Cummins

Allowing for the 90-day total investment horizon Ingersoll Rand is expected to generate 9.79 times less return on investment than Cummins. In addition to that, Ingersoll Rand is 1.08 times more volatile than Cummins. It trades about 0.01 of its total potential returns per unit of risk. Cummins is currently generating about 0.14 per unit of volatility. If you would invest  26,465  in Cummins on September 30, 2024 and sell it today you would earn a total of  8,650  from holding Cummins or generate 32.68% return on investment over 90 days.

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

Ingersoll Rand  vs.  Cummins

Ingersoll Rand

Risk-Adjusted Performance

0 of 100

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 relatively invariable basic indicators, Ingersoll Rand is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Cummins

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cummins are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal primary indicators, Cummins may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ingersoll Rand and Cummins

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

The idea behind Ingersoll Rand and Cummins 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.