Correlation Between Illinois Tool and Acco Brands
Can any of the company-specific risk be diversified away by investing in both Illinois Tool and Acco Brands 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 Illinois Tool and Acco Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Illinois Tool Works and Acco Brands, you can compare the effects of market volatilities on Illinois Tool and Acco Brands 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 Illinois Tool with a short position of Acco Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illinois Tool and Acco Brands.
Diversification Opportunities for Illinois Tool and Acco Brands
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Illinois and Acco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and Acco Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acco Brands and Illinois Tool 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 Illinois Tool Works are associated (or correlated) with Acco Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acco Brands has no effect on the direction of Illinois Tool i.e., Illinois Tool and Acco Brands go up and down completely randomly.
Pair Corralation between Illinois Tool and Acco Brands
Considering the 90-day investment horizon Illinois Tool is expected to generate 2.79 times less return on investment than Acco Brands. But when comparing it to its historical volatility, Illinois Tool Works is 2.25 times less risky than Acco Brands. It trades about 0.27 of its potential returns per unit of risk. Acco Brands is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 488.00 in Acco Brands on August 28, 2024 and sell it today you would earn a total of 108.00 from holding Acco Brands or generate 22.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Illinois Tool Works vs. Acco Brands
Performance |
| Timeline |
| Illinois Tool Works |
| Acco Brands |
Illinois Tool and Acco Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Illinois Tool and Acco Brands
The main advantage of trading using opposite Illinois Tool and Acco Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Illinois Tool position performs unexpectedly, Acco Brands 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 Acco Brands will offset losses from the drop in Acco Brands' long position.| Illinois Tool vs. Aquagold International | Illinois Tool vs. Morningstar Unconstrained Allocation | Illinois Tool vs. High Yield Municipal Fund | Illinois Tool vs. Thrivent High Yield |
| Acco Brands vs. HNI Corp | Acco Brands vs. Steelcase | Acco Brands vs. Ennis Inc | Acco Brands vs. Acacia Research |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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