Correlation Between Illinois Tool and John Bean
Can any of the company-specific risk be diversified away by investing in both Illinois Tool and John Bean 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 John Bean 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 John Bean Technologies, you can compare the effects of market volatilities on Illinois Tool and John Bean 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 John Bean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illinois Tool and John Bean.
Diversification Opportunities for Illinois Tool and John Bean
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Illinois and John is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and John Bean Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Bean Technologies 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 John Bean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Bean Technologies has no effect on the direction of Illinois Tool i.e., Illinois Tool and John Bean go up and down completely randomly.
Pair Corralation between Illinois Tool and John Bean
Considering the 90-day investment horizon Illinois Tool is expected to generate 1.14 times less return on investment than John Bean. But when comparing it to its historical volatility, Illinois Tool Works is 1.84 times less risky than John Bean. It trades about 0.27 of its potential returns per unit of risk. John Bean Technologies is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 11,479 in John Bean Technologies on August 30, 2024 and sell it today you would earn a total of 940.00 from holding John Bean Technologies or generate 8.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Illinois Tool Works vs. John Bean Technologies
Performance |
| Timeline |
| Illinois Tool Works |
| John Bean Technologies |
Illinois Tool and John Bean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Illinois Tool and John Bean
The main advantage of trading using opposite Illinois Tool and John Bean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Illinois Tool position performs unexpectedly, John Bean 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 John Bean will offset losses from the drop in John Bean's long position.| Illinois Tool vs. Pentair PLC | Illinois Tool vs. Parker Hannifin | Illinois Tool vs. Emerson Electric | Illinois Tool vs. Smith AO |
| John Bean vs. Illinois Tool Works | John Bean vs. Pentair PLC | John Bean vs. Emerson Electric | John Bean vs. Smith AO |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |