Correlation Between ITT and Luxfer Holdings
Can any of the company-specific risk be diversified away by investing in both ITT and Luxfer Holdings 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 Luxfer Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITT Inc and Luxfer Holdings PLC, you can compare the effects of market volatilities on ITT and Luxfer Holdings 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 Luxfer Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITT and Luxfer Holdings.
Diversification Opportunities for ITT and Luxfer Holdings
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ITT and Luxfer is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ITT Inc and Luxfer Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luxfer Holdings PLC 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 Luxfer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luxfer Holdings PLC has no effect on the direction of ITT i.e., ITT and Luxfer Holdings go up and down completely randomly.
Pair Corralation between ITT and Luxfer Holdings
Considering the 90-day investment horizon ITT Inc is expected to generate 0.63 times more return on investment than Luxfer Holdings. However, ITT Inc is 1.6 times less risky than Luxfer Holdings. It trades about 0.09 of its potential returns per unit of risk. Luxfer Holdings PLC is currently generating about 0.02 per unit of risk. If you would invest 8,116 in ITT Inc on August 24, 2024 and sell it today you would earn a total of 7,430 from holding ITT Inc or generate 91.55% 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. Luxfer Holdings PLC
Performance |
| Timeline |
| ITT Inc |
| Luxfer Holdings PLC |
ITT and Luxfer Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITT and Luxfer Holdings
The main advantage of trading using opposite ITT and Luxfer Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITT position performs unexpectedly, Luxfer Holdings 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 Luxfer Holdings will offset losses from the drop in Luxfer Holdings' long position.The idea behind ITT Inc and Luxfer Holdings PLC 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.| Luxfer Holdings vs. Graham | Luxfer Holdings vs. Enerpac Tool Group | Luxfer Holdings vs. Kadant Inc | Luxfer Holdings vs. Omega Flex |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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