Correlation Between ITT and Yokogawa Electric
Can any of the company-specific risk be diversified away by investing in both ITT and Yokogawa Electric 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 Yokogawa Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITT Inc and Yokogawa Electric Corp, you can compare the effects of market volatilities on ITT and Yokogawa Electric 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 Yokogawa Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITT and Yokogawa Electric.
Diversification Opportunities for ITT and Yokogawa Electric
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ITT and Yokogawa is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding ITT Inc and Yokogawa Electric Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokogawa Electric Corp 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 Yokogawa Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokogawa Electric Corp has no effect on the direction of ITT i.e., ITT and Yokogawa Electric go up and down completely randomly.
Pair Corralation between ITT and Yokogawa Electric
Considering the 90-day investment horizon ITT Inc is expected to generate 0.7 times more return on investment than Yokogawa Electric. However, ITT Inc is 1.43 times less risky than Yokogawa Electric. It trades about 0.35 of its potential returns per unit of risk. Yokogawa Electric Corp is currently generating about -0.01 per unit of risk. If you would invest 13,983 in ITT Inc on September 1, 2024 and sell it today you would earn a total of 1,629 from holding ITT Inc or generate 11.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITT Inc vs. Yokogawa Electric Corp
Performance |
| Timeline |
| ITT Inc |
| Yokogawa Electric Corp |
ITT and Yokogawa Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITT and Yokogawa Electric
The main advantage of trading using opposite ITT and Yokogawa Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITT position performs unexpectedly, Yokogawa Electric 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 Yokogawa Electric will offset losses from the drop in Yokogawa Electric's long position.The idea behind ITT Inc and Yokogawa Electric Corp 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.| Yokogawa Electric vs. GE Aerospace | Yokogawa Electric vs. Eaton PLC | Yokogawa Electric vs. Siemens AG Class | Yokogawa Electric vs. Parker Hannifin |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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