Correlation Between Global Ship and Illinois Tool
Can any of the company-specific risk be diversified away by investing in both Global Ship 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 Global Ship and Illinois Tool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Ship Lease and Illinois Tool Works, you can compare the effects of market volatilities on Global Ship 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 Global Ship with a short position of Illinois Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and Illinois Tool.
Diversification Opportunities for Global Ship and Illinois Tool
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Global and Illinois is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease 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 Global Ship 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 Global Ship Lease 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 Global Ship i.e., Global Ship and Illinois Tool go up and down completely randomly.
Pair Corralation between Global Ship and Illinois Tool
Assuming the 90 days trading horizon Global Ship Lease is expected to under-perform the Illinois Tool. But the preferred stock apears to be less risky and, when comparing its historical volatility, Global Ship Lease is 1.47 times less risky than Illinois Tool. The preferred stock trades about -0.07 of its potential returns per unit of risk. The Illinois Tool Works is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 25,638 in Illinois Tool Works on November 18, 2024 and sell it today you would earn a total of 173.00 from holding Illinois Tool Works or generate 0.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Ship Lease vs. Illinois Tool Works
Performance |
| Timeline |
| Global Ship Lease |
| Illinois Tool Works |
Global Ship and Illinois Tool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Ship and Illinois Tool
The main advantage of trading using opposite Global Ship and Illinois Tool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship 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.| Global Ship vs. Safe Bulkers | Global Ship vs. Diana Shipping | Global Ship vs. Costamare | Global Ship vs. Safe Bulkers |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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