Correlation Between Illinois Tool and Hillenbrand
Can any of the company-specific risk be diversified away by investing in both Illinois Tool and Hillenbrand 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 Hillenbrand 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 Hillenbrand, you can compare the effects of market volatilities on Illinois Tool and Hillenbrand 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 Hillenbrand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illinois Tool and Hillenbrand.
Diversification Opportunities for Illinois Tool and Hillenbrand
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Illinois and Hillenbrand is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and Hillenbrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hillenbrand 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 Hillenbrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hillenbrand has no effect on the direction of Illinois Tool i.e., Illinois Tool and Hillenbrand go up and down completely randomly.
Pair Corralation between Illinois Tool and Hillenbrand
Considering the 90-day investment horizon Illinois Tool Works is expected to generate 0.5 times more return on investment than Hillenbrand. However, Illinois Tool Works is 1.98 times less risky than Hillenbrand. It trades about 0.05 of its potential returns per unit of risk. Hillenbrand is currently generating about -0.02 per unit of risk. If you would invest 21,009 in Illinois Tool Works on August 30, 2024 and sell it today you would earn a total of 6,595 from holding Illinois Tool Works or generate 31.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Illinois Tool Works vs. Hillenbrand
Performance |
| Timeline |
| Illinois Tool Works |
| Hillenbrand |
Illinois Tool and Hillenbrand Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Illinois Tool and Hillenbrand
The main advantage of trading using opposite Illinois Tool and Hillenbrand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Illinois Tool position performs unexpectedly, Hillenbrand 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 Hillenbrand will offset losses from the drop in Hillenbrand's long position.| Illinois Tool vs. Pentair PLC | Illinois Tool vs. Parker Hannifin | Illinois Tool vs. Emerson Electric | Illinois Tool vs. Smith AO |
| Hillenbrand vs. IDEX Corporation | Hillenbrand vs. Watts Water Technologies | Hillenbrand vs. Donaldson | Hillenbrand vs. Gorman Rupp |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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