Correlation Between Illinois Tool and Vestas Wind
Can any of the company-specific risk be diversified away by investing in both Illinois Tool and Vestas Wind 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 Vestas Wind 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 Vestas Wind Systems, you can compare the effects of market volatilities on Illinois Tool and Vestas Wind 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 Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illinois Tool and Vestas Wind.
Diversification Opportunities for Illinois Tool and Vestas Wind
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Illinois and Vestas is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Illinois Tool i.e., Illinois Tool and Vestas Wind go up and down completely randomly.
Pair Corralation between Illinois Tool and Vestas Wind
Considering the 90-day investment horizon Illinois Tool Works is expected to generate 0.22 times more return on investment than Vestas Wind. However, Illinois Tool Works is 4.48 times less risky than Vestas Wind. It trades about 0.25 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.22 per unit of risk. If you would invest 26,388 in Illinois Tool Works on September 4, 2024 and sell it today you would earn a total of 1,462 from holding Illinois Tool Works or generate 5.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Illinois Tool Works vs. Vestas Wind Systems
Performance |
| Timeline |
| Illinois Tool Works |
| Vestas Wind Systems |
Illinois Tool and Vestas Wind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Illinois Tool and Vestas Wind
The main advantage of trading using opposite Illinois Tool and Vestas Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Illinois Tool position performs unexpectedly, Vestas Wind 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 Vestas Wind will offset losses from the drop in Vestas Wind's long position.| Illinois Tool vs. Pentair PLC | Illinois Tool vs. Parker Hannifin | Illinois Tool vs. Emerson Electric | Illinois Tool vs. Smith AO |
| Vestas Wind vs. KONE Oyj | Vestas Wind vs. Spirax Sarco Engineering PLC | Vestas Wind vs. Atlas Copco ADR | Vestas Wind vs. IDEX Corporation |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |