Correlation Between Generac Holdings and Illinois Tool
Can any of the company-specific risk be diversified away by investing in both Generac Holdings 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 Generac Holdings and Illinois Tool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Generac Holdings and Illinois Tool Works, you can compare the effects of market volatilities on Generac Holdings 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 Generac Holdings with a short position of Illinois Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Generac Holdings and Illinois Tool.
Diversification Opportunities for Generac Holdings and Illinois Tool
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Generac and Illinois is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Generac Holdings 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 Generac Holdings 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 Generac Holdings 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 Generac Holdings i.e., Generac Holdings and Illinois Tool go up and down completely randomly.
Pair Corralation between Generac Holdings and Illinois Tool
Given the investment horizon of 90 days Generac Holdings is expected to generate 2.7 times more return on investment than Illinois Tool. However, Generac Holdings is 2.7 times more volatile than Illinois Tool Works. It trades about 0.06 of its potential returns per unit of risk. Illinois Tool Works is currently generating about 0.06 per unit of risk. If you would invest 11,270 in Generac Holdings on August 27, 2024 and sell it today you would earn a total of 7,638 from holding Generac Holdings or generate 67.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Generac Holdings vs. Illinois Tool Works
Performance |
| Timeline |
| Generac Holdings |
| Illinois Tool Works |
Generac Holdings and Illinois Tool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Generac Holdings and Illinois Tool
The main advantage of trading using opposite Generac Holdings and Illinois Tool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Generac Holdings 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.| Generac Holdings vs. Emerson Electric | Generac Holdings vs. Eaton PLC | Generac Holdings vs. Parker Hannifin | Generac Holdings vs. Illinois Tool Works |
| Illinois Tool vs. Aquagold International | Illinois Tool vs. Morningstar Unconstrained Allocation | Illinois Tool vs. High Yield Municipal Fund | Illinois Tool vs. Thrivent High Yield |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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