Correlation Between Graham and Illinois Tool
Can any of the company-specific risk be diversified away by investing in both Graham and Illinois Tool 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 Graham and Illinois Tool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Graham and Illinois Tool Works, you can compare the effects of market volatilities on Graham and Illinois Tool 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 Graham with a short position of Illinois Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graham and Illinois Tool.
Diversification Opportunities for Graham and Illinois Tool
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Graham and Illinois is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Graham and Illinois Tool Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illinois Tool Works and Graham 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 Graham are associated (or correlated) with Illinois Tool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illinois Tool Works has no effect on the direction of Graham i.e., Graham and Illinois Tool go up and down completely randomly.
Pair Corralation between Graham and Illinois Tool
Considering the 90-day investment horizon Graham is expected to generate 2.8 times more return on investment than Illinois Tool. However, Graham is 2.8 times more volatile than Illinois Tool Works. It trades about 0.13 of its potential returns per unit of risk. Illinois Tool Works is currently generating about 0.11 per unit of risk. If you would invest 2,754 in Graham on August 24, 2024 and sell it today you would earn a total of 1,581 from holding Graham or generate 57.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Graham vs. Illinois Tool Works
Performance |
| Timeline |
| Graham |
| Illinois Tool Works |
Graham and Illinois Tool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Graham and Illinois Tool
The main advantage of trading using opposite Graham and Illinois Tool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graham position performs unexpectedly, Illinois Tool 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 Illinois Tool will offset losses from the drop in Illinois Tool's long position.| Graham vs. Luxfer Holdings PLC | Graham vs. Enerpac Tool Group | Graham vs. Kadant Inc | Graham vs. Omega Flex |
| Illinois Tool vs. Small Cap Core | Illinois Tool vs. Freedom Holding Corp | Illinois Tool vs. Gfl Environmental Holdings | Illinois Tool vs. Growth Fund Of |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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