Correlation Between Illinois Tool and Crawford United

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

Diversification Opportunities for Illinois Tool and Crawford United

0.75

Correlation Coefficient

Illinois Tool  Crawford United

Poor diversification

The 3 months correlation between Illinois and Crawford is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and Crawford United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crawford United 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 Crawford United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crawford United has no effect on the direction of Illinois Tool i.e., Illinois Tool and Crawford United go up and down completely randomly.

Pair Corralation between Illinois Tool and Crawford United

If you would invest  24,836  in Illinois Tool Works on September 3, 2024 and sell it today you would earn a total of  2,916  from holding Illinois Tool Works or generate 11.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Illinois Tool Works  vs.  Crawford United

Illinois Tool Works

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Illinois Tool Works are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Illinois Tool may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Crawford United

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crawford United has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Crawford United is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Illinois Tool and Crawford United

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

The idea behind Illinois Tool Works and Crawford United 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.