Correlation Between Illinois Tool and Ingersoll Rand

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

Diversification Opportunities for Illinois Tool and Ingersoll Rand

0.72

Correlation Coefficient

Illinois Tool  Ingersoll Rand

Poor diversification

The 3 months correlation between Illinois and Ingersoll is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and Ingersoll Rand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ingersoll Rand 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 Ingersoll Rand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ingersoll Rand has no effect on the direction of Illinois Tool i.e., Illinois Tool and Ingersoll Rand go up and down completely randomly.

Pair Corralation between Illinois Tool and Ingersoll Rand

Considering the 90-day investment horizon Illinois Tool Works is expected to generate 0.57 times more return on investment than Ingersoll Rand. However, Illinois Tool Works is 1.76 times less risky than Ingersoll Rand. It trades about -0.06 of its potential returns per unit of risk. Ingersoll Rand is currently generating about -0.22 per unit of risk. If you would invest  27,437  in Illinois Tool Works on December 3, 2024 and sell it today you would lose (1,039) from holding Illinois Tool Works or give up 3.79% of portfolio value over 90 days.

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

Illinois Tool Works  vs.  Ingersoll Rand

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.

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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Illinois Tool and Ingersoll Rand

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

The idea behind Illinois Tool Works and Ingersoll Rand 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 Managers module to screen money managers from public funds and ETFs managed around the world.