Correlation Between Illinois Tool and SOLSTAD OFFSHORE

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

Diversification Opportunities for Illinois Tool and SOLSTAD OFFSHORE

0.28

Correlation Coefficient

Illinois Tool  SOLSTAD OFFSHORE

Modest diversification

The 3 months correlation between Illinois and SOLSTAD is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and SOLSTAD OFFSHORE NK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOLSTAD OFFSHORE 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 SOLSTAD OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOLSTAD OFFSHORE has no effect on the direction of Illinois Tool i.e., Illinois Tool and SOLSTAD OFFSHORE go up and down completely randomly.

Pair Corralation between Illinois Tool and SOLSTAD OFFSHORE

Assuming the 90 days horizon Illinois Tool is expected to generate 1.47 times less return on investment than SOLSTAD OFFSHORE. But when comparing it to its historical volatility, Illinois Tool Works is 3.56 times less risky than SOLSTAD OFFSHORE. It trades about 0.22 of its potential returns per unit of risk. SOLSTAD OFFSHORE NK is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  299.00  in SOLSTAD OFFSHORE NK on September 3, 2024 and sell it today you would earn a total of  59.00  from holding SOLSTAD OFFSHORE NK or generate 19.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Illinois Tool Works  vs.  SOLSTAD OFFSHORE NK

Illinois Tool Works

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Illinois Tool Works are ranked lower than 17 (%) 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.

SOLSTAD OFFSHORE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SOLSTAD OFFSHORE NK are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, SOLSTAD OFFSHORE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Illinois Tool and SOLSTAD OFFSHORE

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

The idea behind Illinois Tool Works and SOLSTAD OFFSHORE NK 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .