Correlation Between Illinois Tool and SEGRO Plc

Can any of the company-specific risk be diversified away by investing in both Illinois Tool and SEGRO Plc 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 SEGRO Plc 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 SEGRO Plc, you can compare the effects of market volatilities on Illinois Tool and SEGRO Plc 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 SEGRO Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illinois Tool and SEGRO Plc.

Diversification Opportunities for Illinois Tool and SEGRO Plc

-0.85

Correlation Coefficient

Illinois Tool  SEGRO Plc

Pay attention - limited upside

The 3 months correlation between Illinois and SEGRO is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and SEGRO Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEGRO Plc 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 SEGRO Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEGRO Plc has no effect on the direction of Illinois Tool i.e., Illinois Tool and SEGRO Plc go up and down completely randomly.

Pair Corralation between Illinois Tool and SEGRO Plc

Assuming the 90 days horizon Illinois Tool Works is expected to generate 0.53 times more return on investment than SEGRO Plc. However, Illinois Tool Works is 1.88 times less risky than SEGRO Plc. It trades about 0.31 of its potential returns per unit of risk. SEGRO Plc is currently generating about -0.07 per unit of risk. If you would invest  21,889  in Illinois Tool Works on September 5, 2024 and sell it today you would earn a total of  4,601  from holding Illinois Tool Works or generate 21.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Illinois Tool Works  vs.  SEGRO Plc

Illinois Tool Works

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Illinois Tool Works are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Illinois Tool reported solid returns over the last few months and may actually be approaching a breakup point.

SEGRO Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEGRO Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Illinois Tool and SEGRO Plc

The main advantage of trading using opposite Illinois Tool and SEGRO Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Illinois Tool position performs unexpectedly, SEGRO Plc 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 SEGRO Plc will offset losses from the drop in SEGRO Plc's long position.

The idea behind Illinois Tool Works and SEGRO Plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.