Correlation Between IDEX and Cummins
Can any of the company-specific risk be diversified away by investing in both IDEX and Cummins 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 Cummins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDEX Corporation and Cummins, you can compare the effects of market volatilities on IDEX and Cummins 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 Cummins. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDEX and Cummins.
Diversification Opportunities for IDEX and Cummins
Almost no diversification
The 3 months correlation between IDEX and Cummins is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding IDEX Corp. and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins 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 Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of IDEX i.e., IDEX and Cummins go up and down completely randomly.
Pair Corralation between IDEX and Cummins
Considering the 90-day investment horizon IDEX Corporation is expected to generate 1.0 times more return on investment than Cummins. However, IDEX Corporation is 1.0 times less risky than Cummins. It trades about 0.31 of its potential returns per unit of risk. Cummins is currently generating about 0.27 per unit of risk. If you would invest 20,484 in IDEX Corporation on August 28, 2024 and sell it today you would earn a total of 3,122 from holding IDEX Corporation or generate 15.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
IDEX Corp. vs. Cummins
Performance |
| Timeline |
| IDEX |
| Cummins |
IDEX and Cummins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDEX and Cummins
The main advantage of trading using opposite IDEX and Cummins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEX position performs unexpectedly, Cummins 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 Cummins will offset losses from the drop in Cummins' long position.| IDEX vs. Aquagold International | IDEX vs. Morningstar Unconstrained Allocation | IDEX vs. High Yield Municipal Fund | IDEX vs. Thrivent High Yield |
| Cummins vs. Standex International | Cummins vs. Intevac | Cummins vs. Thermon Group Holdings | Cummins vs. Enpro Industries |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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