Correlation Between ITT and Chart Industries
Can any of the company-specific risk be diversified away by investing in both ITT and Chart Industries 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 Chart Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITT Inc and Chart Industries, you can compare the effects of market volatilities on ITT and Chart Industries 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 Chart Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITT and Chart Industries.
Diversification Opportunities for ITT and Chart Industries
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ITT and Chart is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ITT Inc and Chart Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chart Industries 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 Chart Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chart Industries has no effect on the direction of ITT i.e., ITT and Chart Industries go up and down completely randomly.
Pair Corralation between ITT and Chart Industries
Considering the 90-day investment horizon ITT is expected to generate 5.2 times less return on investment than Chart Industries. But when comparing it to its historical volatility, ITT Inc is 2.26 times less risky than Chart Industries. It trades about 0.21 of its potential returns per unit of risk. Chart Industries is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest 12,061 in Chart Industries on August 24, 2024 and sell it today you would earn a total of 5,547 from holding Chart Industries or generate 45.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITT Inc vs. Chart Industries
Performance |
| Timeline |
| ITT Inc |
| Chart Industries |
ITT and Chart Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITT and Chart Industries
The main advantage of trading using opposite ITT and Chart Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITT position performs unexpectedly, Chart Industries 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 Chart Industries will offset losses from the drop in Chart Industries' long position.The idea behind ITT Inc and Chart Industries 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.| Chart Industries vs. Crane NXT Co | Chart Industries vs. Donaldson | Chart Industries vs. ITT Inc | Chart Industries 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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