Correlation Between Ingersoll Rand and Smith AO
Can any of the company-specific risk be diversified away by investing in both Ingersoll Rand and Smith AO 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 Ingersoll Rand and Smith AO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ingersoll Rand and Smith AO, you can compare the effects of market volatilities on Ingersoll Rand and Smith AO 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 Ingersoll Rand with a short position of Smith AO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ingersoll Rand and Smith AO.
Diversification Opportunities for Ingersoll Rand and Smith AO
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ingersoll and Smith is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ingersoll Rand and Smith AO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith AO and Ingersoll Rand 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 Ingersoll Rand are associated (or correlated) with Smith AO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith AO has no effect on the direction of Ingersoll Rand i.e., Ingersoll Rand and Smith AO go up and down completely randomly.
Pair Corralation between Ingersoll Rand and Smith AO
Allowing for the 90-day total investment horizon Ingersoll Rand is expected to generate 1.78 times more return on investment than Smith AO. However, Ingersoll Rand is 1.78 times more volatile than Smith AO. It trades about 0.21 of its potential returns per unit of risk. Smith AO is currently generating about -0.22 per unit of risk. If you would invest 9,709 in Ingersoll Rand on August 27, 2024 and sell it today you would earn a total of 691.00 from holding Ingersoll Rand or generate 7.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ingersoll Rand vs. Smith AO
Performance |
| Timeline |
| Ingersoll Rand |
| Smith AO |
Ingersoll Rand and Smith AO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ingersoll Rand and Smith AO
The main advantage of trading using opposite Ingersoll Rand and Smith AO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ingersoll Rand position performs unexpectedly, Smith AO 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 Smith AO will offset losses from the drop in Smith AO's long position.| Ingersoll Rand vs. IDEX Corporation | Ingersoll Rand vs. Flowserve | Ingersoll Rand vs. Donaldson | Ingersoll Rand vs. Franklin Electric Co |
| Smith AO vs. Dover | Smith AO vs. Illinois Tool Works | Smith AO vs. Xylem Inc | Smith AO vs. Franklin Electric Co |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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