Correlation Between Illinois Tool and Aumann AG

Can any of the company-specific risk be diversified away by investing in both Illinois Tool and Aumann AG 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 Aumann AG 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 Aumann AG, you can compare the effects of market volatilities on Illinois Tool and Aumann AG 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 Aumann AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illinois Tool and Aumann AG.

Diversification Opportunities for Illinois Tool and Aumann AG

0.07

Correlation Coefficient

Illinois Tool  Aumann AG

Significant diversification

The 3 months correlation between Illinois and Aumann is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and Aumann AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aumann AG 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 Aumann AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aumann AG has no effect on the direction of Illinois Tool i.e., Illinois Tool and Aumann AG go up and down completely randomly.

Pair Corralation between Illinois Tool and Aumann AG

Considering the 90-day investment horizon Illinois Tool is expected to generate 962.5 times less return on investment than Aumann AG. But when comparing it to its historical volatility, Illinois Tool Works is 2.02 times less risky than Aumann AG. It trades about 0.0 of its potential returns per unit of risk. Aumann AG is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,050  in Aumann AG on December 29, 2024 and sell it today you would earn a total of  250.00  from holding Aumann AG or generate 23.81% return on investment over 90 days.

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

Illinois Tool Works  vs.  Aumann AG

Illinois Tool Works

Risk-Adjusted Performance

Very Weak

Over the last 90 days Illinois Tool Works has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Illinois Tool is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Aumann AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aumann AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Aumann AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Illinois Tool and Aumann AG

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

The idea behind Illinois Tool Works and Aumann AG 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.