Correlation Between IDEX and Hillenbrand
Can any of the company-specific risk be diversified away by investing in both IDEX and Hillenbrand 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 Hillenbrand into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDEX Corporation and Hillenbrand, you can compare the effects of market volatilities on IDEX and Hillenbrand 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 Hillenbrand. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDEX and Hillenbrand.
Diversification Opportunities for IDEX and Hillenbrand
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IDEX and Hillenbrand is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding IDEX Corp. and Hillenbrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hillenbrand 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 Hillenbrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hillenbrand has no effect on the direction of IDEX i.e., IDEX and Hillenbrand go up and down completely randomly.
Pair Corralation between IDEX and Hillenbrand
Considering the 90-day investment horizon IDEX is expected to generate 1.35 times less return on investment than Hillenbrand. But when comparing it to its historical volatility, IDEX Corporation is 1.77 times less risky than Hillenbrand. It trades about 0.27 of its potential returns per unit of risk. Hillenbrand is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,802 in Hillenbrand on August 24, 2024 and sell it today you would earn a total of 495.00 from holding Hillenbrand or generate 17.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IDEX Corp. vs. Hillenbrand
Performance |
| Timeline |
| IDEX |
| Hillenbrand |
IDEX and Hillenbrand Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDEX and Hillenbrand
The main advantage of trading using opposite IDEX and Hillenbrand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEX position performs unexpectedly, Hillenbrand 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 Hillenbrand will offset losses from the drop in Hillenbrand's long position.The idea behind IDEX Corporation and Hillenbrand 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.| Hillenbrand vs. IDEX Corporation | Hillenbrand vs. Watts Water Technologies | Hillenbrand vs. Donaldson | Hillenbrand vs. Gorman Rupp |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |