Correlation Between Illinois Tool and Ocean Power
Can any of the company-specific risk be diversified away by investing in both Illinois Tool and Ocean Power 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 Ocean Power 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 Ocean Power Technologies, you can compare the effects of market volatilities on Illinois Tool and Ocean Power 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 Ocean Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illinois Tool and Ocean Power.
Diversification Opportunities for Illinois Tool and Ocean Power
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Illinois and Ocean is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and Ocean Power Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Power 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 Ocean Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Power Technologies has no effect on the direction of Illinois Tool i.e., Illinois Tool and Ocean Power go up and down completely randomly.
Pair Corralation between Illinois Tool and Ocean Power
Considering the 90-day investment horizon Illinois Tool is expected to generate 2.81 times less return on investment than Ocean Power. But when comparing it to its historical volatility, Illinois Tool Works is 3.39 times less risky than Ocean Power. It trades about 0.27 of its potential returns per unit of risk. Ocean Power Technologies is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 15.00 in Ocean Power Technologies on August 28, 2024 and sell it today you would earn a total of 3.00 from holding Ocean Power Technologies or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Illinois Tool Works vs. Ocean Power Technologies
Performance |
| Timeline |
| Illinois Tool Works |
| Ocean Power Technologies |
Illinois Tool and Ocean Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Illinois Tool and Ocean Power
The main advantage of trading using opposite Illinois Tool and Ocean Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Illinois Tool position performs unexpectedly, Ocean Power 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 Ocean Power will offset losses from the drop in Ocean Power's long position.| Illinois Tool vs. Pentair PLC | Illinois Tool vs. Parker Hannifin | Illinois Tool vs. Emerson Electric | Illinois Tool vs. Smith AO |
| Ocean Power vs. Pioneer Power Solutions | Ocean Power vs. CBAK Energy Technology | Ocean Power vs. Ideal Power | Ocean Power vs. Expion360 |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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