Correlation Between Rockwell Automation and Xylem
Can any of the company-specific risk be diversified away by investing in both Rockwell Automation and Xylem 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 Rockwell Automation and Xylem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rockwell Automation and Xylem Inc, you can compare the effects of market volatilities on Rockwell Automation and Xylem 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 Rockwell Automation with a short position of Xylem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rockwell Automation and Xylem.
Diversification Opportunities for Rockwell Automation and Xylem
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rockwell and Xylem is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Rockwell Automation and Xylem Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xylem Inc and Rockwell Automation 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 Rockwell Automation are associated (or correlated) with Xylem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xylem Inc has no effect on the direction of Rockwell Automation i.e., Rockwell Automation and Xylem go up and down completely randomly.
Pair Corralation between Rockwell Automation and Xylem
Considering the 90-day investment horizon Rockwell Automation is expected to generate 1.58 times more return on investment than Xylem. However, Rockwell Automation is 1.58 times more volatile than Xylem Inc. It trades about 0.1 of its potential returns per unit of risk. Xylem Inc is currently generating about -0.13 per unit of risk. If you would invest 26,522 in Rockwell Automation on August 24, 2024 and sell it today you would earn a total of 1,308 from holding Rockwell Automation or generate 4.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rockwell Automation vs. Xylem Inc
Performance |
| Timeline |
| Rockwell Automation |
| Xylem Inc |
Rockwell Automation and Xylem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rockwell Automation and Xylem
The main advantage of trading using opposite Rockwell Automation and Xylem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rockwell Automation position performs unexpectedly, Xylem 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 Xylem will offset losses from the drop in Xylem's long position.| Rockwell Automation vs. Dover | Rockwell Automation vs. Illinois Tool Works | Rockwell Automation vs. Ingersoll Rand | Rockwell Automation vs. Eaton PLC |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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