Correlation Between SMC Corp and Illinois Tool

Can any of the company-specific risk be diversified away by investing in both SMC Corp 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 SMC Corp and Illinois Tool into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SMC Corp Japan and Illinois Tool Works, you can compare the effects of market volatilities on SMC Corp 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 SMC Corp with a short position of Illinois Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMC Corp and Illinois Tool.

Diversification Opportunities for SMC Corp and Illinois Tool

-0.02

Correlation Coefficient

SMC Corp  Illinois Tool

Good diversification

The 3 months correlation between SMC and Illinois is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding SMC Corp Japan 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 SMC Corp 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 SMC Corp Japan 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 SMC Corp i.e., SMC Corp and Illinois Tool go up and down completely randomly.

Pair Corralation between SMC Corp and Illinois Tool

Assuming the 90 days horizon SMC Corp is expected to generate 28.63 times less return on investment than Illinois Tool. In addition to that, SMC Corp is 1.53 times more volatile than Illinois Tool Works. It trades about 0.0 of its total potential returns per unit of risk. Illinois Tool Works is currently generating about 0.04 per unit of volatility. If you would invest  21,188  in Illinois Tool Works on September 24, 2024 and sell it today you would earn a total of  4,576  from holding Illinois Tool Works or generate 21.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

SMC Corp Japan  vs.  Illinois Tool Works

SMC Corp Japan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMC Corp Japan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Illinois Tool Works

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Illinois Tool Works has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Illinois Tool is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SMC Corp and Illinois Tool

The main advantage of trading using opposite SMC Corp and Illinois Tool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMC Corp 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.

The idea behind SMC Corp Japan and Illinois Tool Works 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.