Correlation Between Mueller Water and Illinois Tool
Can any of the company-specific risk be diversified away by investing in both Mueller Water 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 Mueller Water and Illinois Tool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mueller Water Products and Illinois Tool Works, you can compare the effects of market volatilities on Mueller Water 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 Mueller Water with a short position of Illinois Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mueller Water and Illinois Tool.
Diversification Opportunities for Mueller Water and Illinois Tool
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mueller and Illinois is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Mueller Water Products 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 Mueller Water 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 Mueller Water Products 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 Mueller Water i.e., Mueller Water and Illinois Tool go up and down completely randomly.
Pair Corralation between Mueller Water and Illinois Tool
Considering the 90-day investment horizon Mueller Water Products is expected to generate 1.61 times more return on investment than Illinois Tool. However, Mueller Water is 1.61 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 0.05 per unit of risk. If you would invest 1,122 in Mueller Water Products on August 24, 2024 and sell it today you would earn a total of 1,375 from holding Mueller Water Products or generate 122.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mueller Water Products vs. Illinois Tool Works
Performance |
| Timeline |
| Mueller Water Products |
| Illinois Tool Works |
Mueller Water and Illinois Tool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mueller Water and Illinois Tool
The main advantage of trading using opposite Mueller Water and Illinois Tool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mueller Water 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.| Mueller Water vs. Enerpac Tool Group | Mueller Water vs. Luxfer Holdings PLC | Mueller Water vs. John Bean Technologies | Mueller Water vs. CSW Industrials |
| Illinois Tool vs. Small Cap Core | Illinois Tool vs. Freedom Holding Corp | Illinois Tool vs. Gfl Environmental Holdings | Illinois Tool vs. Growth Fund Of |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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