Correlation Between Taylor Devices and ITT

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

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

Diversification Opportunities for Taylor Devices and ITT

-0.54

Correlation Coefficient

Taylor Devices  ITT

Excellent diversification

The 3 months correlation between Taylor and ITT is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Taylor Devices and ITT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITT Inc and Taylor Devices 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 Taylor Devices 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 Taylor Devices i.e., Taylor Devices and ITT go up and down completely randomly.

Pair Corralation between Taylor Devices and ITT

Given the investment horizon of 90 days Taylor Devices is expected to under-perform the ITT. In addition to that, Taylor Devices is 3.0 times more volatile than ITT Inc. It trades about -0.07 of its total potential returns per unit of risk. ITT Inc is currently generating about 0.16 per unit of volatility. If you would invest  13,322  in ITT Inc on September 12, 2024 and sell it today you would earn a total of  2,058  from holding ITT Inc or generate 15.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Taylor Devices  vs.  ITT Inc

Taylor Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taylor Devices has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

ITT Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ITT Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, ITT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taylor Devices and ITT

The main advantage of trading using opposite Taylor Devices and ITT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taylor Devices 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 Taylor Devices 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..