Correlation Between Illinois Tool and Helios Technologies

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

Diversification Opportunities for Illinois Tool and Helios Technologies

0.92

Correlation Coefficient

Illinois Tool  Helios Technologies

Almost no diversification

The 3 months correlation between Illinois and Helios is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and Helios Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helios Technologies 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 Helios Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helios Technologies has no effect on the direction of Illinois Tool i.e., Illinois Tool and Helios Technologies go up and down completely randomly.

Pair Corralation between Illinois Tool and Helios Technologies

Considering the 90-day investment horizon Illinois Tool Works is expected to generate 0.45 times more return on investment than Helios Technologies. However, Illinois Tool Works is 2.22 times less risky than Helios Technologies. It trades about -0.52 of its potential returns per unit of risk. Helios Technologies is currently generating about -0.45 per unit of risk. If you would invest  27,246  in Illinois Tool Works on October 8, 2024 and sell it today you would lose (2,017) from holding Illinois Tool Works or give up 7.4% 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.  Helios Technologies

Illinois Tool Works

Risk-Adjusted Performance

0 of 100

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.

Helios Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Helios Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Helios Technologies is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Illinois Tool and Helios Technologies

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

The idea behind Illinois Tool Works and Helios Technologies 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 Global Correlations module to find global opportunities by holding instruments from different markets.