Correlation Between Illinois Tool and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both Illinois Tool and Emerson 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 Illinois Tool and Emerson Electric 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 Emerson Electric, you can compare the effects of market volatilities on Illinois Tool and Emerson 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 Illinois Tool with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illinois Tool and Emerson Electric.
Diversification Opportunities for Illinois Tool and Emerson Electric
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Illinois and Emerson is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric 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 Emerson Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Electric has no effect on the direction of Illinois Tool i.e., Illinois Tool and Emerson Electric go up and down completely randomly.
Pair Corralation between Illinois Tool and Emerson Electric
Considering the 90-day investment horizon Illinois Tool is expected to generate 3.34 times less return on investment than Emerson Electric. But when comparing it to its historical volatility, Illinois Tool Works is 1.82 times less risky than Emerson Electric. It trades about 0.19 of its potential returns per unit of risk. Emerson Electric is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 10,807 in Emerson Electric on August 24, 2024 and sell it today you would earn a total of 2,020 from holding Emerson Electric or generate 18.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Illinois Tool Works vs. Emerson Electric
Performance |
| Timeline |
| Illinois Tool Works |
| Emerson Electric |
Illinois Tool and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Illinois Tool and Emerson Electric
The main advantage of trading using opposite Illinois Tool and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Illinois Tool position performs unexpectedly, Emerson 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 Emerson Electric will offset losses from the drop in Emerson Electric'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 |
| Emerson Electric vs. Dover | Emerson Electric vs. Parker Hannifin | Emerson Electric vs. Pentair PLC | Emerson Electric vs. Eaton PLC |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine |