Correlation Between IDEX and Rockwell Automation
Can any of the company-specific risk be diversified away by investing in both IDEX and Rockwell Automation 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 Rockwell Automation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDEX Corporation and Rockwell Automation, you can compare the effects of market volatilities on IDEX and Rockwell Automation 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 Rockwell Automation. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDEX and Rockwell Automation.
Diversification Opportunities for IDEX and Rockwell Automation
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IDEX and Rockwell is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding IDEX Corp. and Rockwell Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockwell Automation 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 Rockwell Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockwell Automation has no effect on the direction of IDEX i.e., IDEX and Rockwell Automation go up and down completely randomly.
Pair Corralation between IDEX and Rockwell Automation
Considering the 90-day investment horizon IDEX Corporation is expected to generate 0.77 times more return on investment than Rockwell Automation. However, IDEX Corporation is 1.29 times less risky than Rockwell Automation. It trades about 0.28 of its potential returns per unit of risk. Rockwell Automation is currently generating about 0.14 per unit of risk. If you would invest 20,484 in IDEX Corporation on August 27, 2024 and sell it today you would earn a total of 2,766 from holding IDEX Corporation or generate 13.5% 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. Rockwell Automation
Performance |
| Timeline |
| IDEX |
| Rockwell Automation |
IDEX and Rockwell Automation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDEX and Rockwell Automation
The main advantage of trading using opposite IDEX and Rockwell Automation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEX position performs unexpectedly, Rockwell Automation 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 Rockwell Automation will offset losses from the drop in Rockwell Automation's long position.The idea behind IDEX Corporation and Rockwell Automation 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.| Rockwell Automation vs. Dover | Rockwell Automation vs. Illinois Tool Works | Rockwell Automation vs. Ingersoll Rand | Rockwell Automation vs. Eaton PLC |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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