Correlation Between Ingersoll Rand and ITT

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

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

Diversification Opportunities for Ingersoll Rand and ITT

0.78

Correlation Coefficient

Ingersoll Rand  ITT

Poor diversification

The 3 months correlation between Ingersoll and ITT is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ingersoll Rand and ITT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITT Inc 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 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 Ingersoll Rand i.e., Ingersoll Rand and ITT go up and down completely randomly.

Pair Corralation between Ingersoll Rand and ITT

Allowing for the 90-day total investment horizon Ingersoll Rand is expected to under-perform the ITT. But the stock apears to be less risky and, when comparing its historical volatility, Ingersoll Rand is 1.0 times less risky than ITT. The stock trades about -0.09 of its potential returns per unit of risk. The ITT Inc is currently generating about -0.04 of returns per unit of risk over similar time horizon. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Ingersoll Rand  vs.  ITT Inc

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.

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 Ingersoll Rand and ITT

The main advantage of trading using opposite Ingersoll Rand and ITT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ingersoll Rand 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 Ingersoll Rand 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.