Correlation Between CSW Industrials and IDEX
Can any of the company-specific risk be diversified away by investing in both CSW Industrials and IDEX 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 CSW Industrials and IDEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSW Industrials and IDEX Corporation, you can compare the effects of market volatilities on CSW Industrials and IDEX 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 CSW Industrials with a short position of IDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSW Industrials and IDEX.
Diversification Opportunities for CSW Industrials and IDEX
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CSW and IDEX is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding CSW Industrials and IDEX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEX and CSW Industrials 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 CSW Industrials are associated (or correlated) with IDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEX has no effect on the direction of CSW Industrials i.e., CSW Industrials and IDEX go up and down completely randomly.
Pair Corralation between CSW Industrials and IDEX
Given the investment horizon of 90 days CSW Industrials is expected to generate 1.19 times less return on investment than IDEX. In addition to that, CSW Industrials is 1.05 times more volatile than IDEX Corporation. It trades about 0.19 of its total potential returns per unit of risk. IDEX Corporation is currently generating about 0.23 per unit of volatility. If you would invest 20,486 in IDEX Corporation on August 24, 2024 and sell it today you would earn a total of 2,259 from holding IDEX Corporation or generate 11.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSW Industrials vs. IDEX Corp.
Performance |
| Timeline |
| CSW Industrials |
| IDEX |
CSW Industrials and IDEX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSW Industrials and IDEX
The main advantage of trading using opposite CSW Industrials and IDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSW Industrials position performs unexpectedly, IDEX 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 IDEX will offset losses from the drop in IDEX's long position.| CSW Industrials vs. Enerpac Tool Group | CSW Industrials vs. Luxfer Holdings PLC | CSW Industrials vs. John Bean Technologies | CSW Industrials vs. ITT Inc |
Check out your portfolio center.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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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