Correlation Between Illinois Tool and Morgan Advanced
Can any of the company-specific risk be diversified away by investing in both Illinois Tool and Morgan Advanced 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 Morgan Advanced 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 Morgan Advanced Materials, you can compare the effects of market volatilities on Illinois Tool and Morgan Advanced 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 Morgan Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illinois Tool and Morgan Advanced.
Diversification Opportunities for Illinois Tool and Morgan Advanced
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Illinois and Morgan is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and Morgan Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Advanced Materials 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 Morgan Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Advanced Materials has no effect on the direction of Illinois Tool i.e., Illinois Tool and Morgan Advanced go up and down completely randomly.
Pair Corralation between Illinois Tool and Morgan Advanced
Considering the 90-day investment horizon Illinois Tool Works is expected to generate 1.24 times more return on investment than Morgan Advanced. However, Illinois Tool is 1.24 times more volatile than Morgan Advanced Materials. It trades about 0.15 of its potential returns per unit of risk. Morgan Advanced Materials is currently generating about -0.34 per unit of risk. If you would invest 25,333 in Illinois Tool Works on October 29, 2024 and sell it today you would earn a total of 657.00 from holding Illinois Tool Works or generate 2.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Illinois Tool Works vs. Morgan Advanced Materials
Performance |
| Timeline |
| Illinois Tool Works |
| Morgan Advanced Materials |
Illinois Tool and Morgan Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Illinois Tool and Morgan Advanced
The main advantage of trading using opposite Illinois Tool and Morgan Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Illinois Tool position performs unexpectedly, Morgan Advanced 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 Morgan Advanced will offset losses from the drop in Morgan Advanced's long position.| Illinois Tool vs. Pentair PLC | Illinois Tool vs. Parker Hannifin | Illinois Tool vs. Emerson Electric | Illinois Tool vs. Smith AO |
| Morgan Advanced vs. Parker Hannifin | Morgan Advanced vs. Eaton PLC | Morgan Advanced vs. Dover | Morgan Advanced vs. Illinois Tool Works |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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