Correlation Between Illinois Tool and Dover
Can any of the company-specific risk be diversified away by investing in both Illinois Tool and Dover 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 Dover 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 Dover, you can compare the effects of market volatilities on Illinois Tool and Dover 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 Dover. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illinois Tool and Dover.
Diversification Opportunities for Illinois Tool and Dover
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Illinois and Dover is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and Dover in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dover 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 Dover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dover has no effect on the direction of Illinois Tool i.e., Illinois Tool and Dover go up and down completely randomly.
Pair Corralation between Illinois Tool and Dover
Considering the 90-day investment horizon Illinois Tool is expected to generate 1.65 times less return on investment than Dover. But when comparing it to its historical volatility, Illinois Tool Works is 1.22 times less risky than Dover. It trades about 0.05 of its potential returns per unit of risk. Dover is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 13,779 in Dover on August 24, 2024 and sell it today you would earn a total of 6,470 from holding Dover or generate 46.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Illinois Tool Works vs. Dover
Performance |
| Timeline |
| Illinois Tool Works |
| Dover |
Illinois Tool and Dover Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Illinois Tool and Dover
The main advantage of trading using opposite Illinois Tool and Dover positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Illinois Tool position performs unexpectedly, Dover 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 Dover will offset losses from the drop in Dover's long position.| Illinois Tool vs. Small Cap Core | Illinois Tool vs. Freedom Holding Corp | Illinois Tool vs. Gfl Environmental Holdings | Illinois Tool vs. Growth Fund Of |
| Dover vs. Small Cap Core | Dover vs. Freedom Holding Corp | Dover vs. Gfl Environmental Holdings | Dover vs. Growth Fund Of |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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