Correlation Between IDEX and Ametek
Can any of the company-specific risk be diversified away by investing in both IDEX and Ametek 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 IDEX and Ametek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDEX Corporation and Ametek Inc, you can compare the effects of market volatilities on IDEX and Ametek 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 IDEX with a short position of Ametek. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDEX and Ametek.
Diversification Opportunities for IDEX and Ametek
Very poor diversification
The 3 months correlation between IDEX and Ametek is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding IDEX Corp. and Ametek Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ametek Inc and IDEX 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 IDEX Corporation are associated (or correlated) with Ametek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ametek Inc has no effect on the direction of IDEX i.e., IDEX and Ametek go up and down completely randomly.
Pair Corralation between IDEX and Ametek
Considering the 90-day investment horizon IDEX Corporation is expected to generate 0.97 times more return on investment than Ametek. However, IDEX Corporation is 1.04 times less risky than Ametek. It trades about 0.33 of its potential returns per unit of risk. Ametek Inc is currently generating about 0.13 per unit of risk. If you would invest 20,932 in IDEX Corporation on November 5, 2024 and sell it today you would earn a total of 1,499 from holding IDEX Corporation or generate 7.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
IDEX Corp. vs. Ametek Inc
Performance |
| Timeline |
| IDEX |
| Ametek Inc |
IDEX and Ametek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDEX and Ametek
The main advantage of trading using opposite IDEX and Ametek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEX position performs unexpectedly, Ametek 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 Ametek will offset losses from the drop in Ametek's long position.The idea behind IDEX Corporation and Ametek 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.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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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