Correlation Between Knife River and Illinois Tool
Can any of the company-specific risk be diversified away by investing in both Knife River and Illinois Tool 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 Knife River and Illinois Tool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knife River and Illinois Tool Works, you can compare the effects of market volatilities on Knife River and Illinois Tool 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 Knife River with a short position of Illinois Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knife River and Illinois Tool.
Diversification Opportunities for Knife River and Illinois Tool
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Knife and Illinois is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Illinois Tool Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illinois Tool Works and Knife River 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 Knife River are associated (or correlated) with Illinois Tool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illinois Tool Works has no effect on the direction of Knife River i.e., Knife River and Illinois Tool go up and down completely randomly.
Pair Corralation between Knife River and Illinois Tool
Considering the 90-day investment horizon Knife River is expected to generate 2.0 times more return on investment than Illinois Tool. However, Knife River is 2.0 times more volatile than Illinois Tool Works. It trades about 0.1 of its potential returns per unit of risk. Illinois Tool Works is currently generating about 0.02 per unit of risk. If you would invest 3,551 in Knife River on January 15, 2025 and sell it today you would earn a total of 5,849 from holding Knife River or generate 164.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.34% |
| Values | Daily Returns |
Knife River vs. Illinois Tool Works
Performance |
| Timeline |
| Knife River |
| Illinois Tool Works |
Knife River and Illinois Tool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knife River and Illinois Tool
The main advantage of trading using opposite Knife River and Illinois Tool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knife River position performs unexpectedly, Illinois Tool 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 Illinois Tool will offset losses from the drop in Illinois Tool's long position.| Knife River vs. Yum Brands | Knife River vs. Amkor Technology | Knife River vs. Flanigans Enterprises | Knife River vs. IPG Photonics |
| Illinois Tool vs. Pentair PLC | Illinois Tool vs. Parker Hannifin | Illinois Tool vs. Emerson Electric | Illinois Tool 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |