Correlation Between ITT and Gorman Rupp
Can any of the company-specific risk be diversified away by investing in both ITT and Gorman Rupp 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 ITT and Gorman Rupp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITT Inc and Gorman Rupp, you can compare the effects of market volatilities on ITT and Gorman Rupp 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 ITT with a short position of Gorman Rupp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITT and Gorman Rupp.
Diversification Opportunities for ITT and Gorman Rupp
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ITT and Gorman is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ITT Inc and Gorman Rupp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gorman Rupp and ITT 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 ITT Inc are associated (or correlated) with Gorman Rupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gorman Rupp has no effect on the direction of ITT i.e., ITT and Gorman Rupp go up and down completely randomly.
Pair Corralation between ITT and Gorman Rupp
Considering the 90-day investment horizon ITT Inc is expected to generate 0.83 times more return on investment than Gorman Rupp. However, ITT Inc is 1.21 times less risky than Gorman Rupp. It trades about 0.09 of its potential returns per unit of risk. Gorman Rupp is currently generating about 0.06 per unit of risk. If you would invest 14,024 in ITT Inc on November 1, 2024 and sell it today you would earn a total of 1,170 from holding ITT Inc or generate 8.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITT Inc vs. Gorman Rupp
Performance |
| Timeline |
| ITT Inc |
| Gorman Rupp |
ITT and Gorman Rupp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITT and Gorman Rupp
The main advantage of trading using opposite ITT and Gorman Rupp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITT position performs unexpectedly, Gorman Rupp 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 Gorman Rupp will offset losses from the drop in Gorman Rupp's long position.The idea behind ITT Inc and Gorman Rupp 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.| Gorman Rupp vs. Standex International | Gorman Rupp vs. Franklin Electric Co | Gorman Rupp vs. Omega Flex | Gorman Rupp vs. China Yuchai International |
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.
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