Correlation Between Illinois Tool and Weir Group

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

Diversification Opportunities for Illinois Tool and Weir Group

0.49

Correlation Coefficient

Illinois Tool  Weir Group

Very weak diversification

The 3 months correlation between Illinois and Weir is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and The Weir Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weir Group 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 Weir Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weir Group has no effect on the direction of Illinois Tool i.e., Illinois Tool and Weir Group go up and down completely randomly.

Pair Corralation between Illinois Tool and Weir Group

Assuming the 90 days horizon Illinois Tool is expected to generate 1.03 times less return on investment than Weir Group. But when comparing it to its historical volatility, Illinois Tool Works is 1.28 times less risky than Weir Group. It trades about 0.06 of its potential returns per unit of risk. The Weir Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,748  in The Weir Group on May 8, 2025 and sell it today you would earn a total of  114.00  from holding The Weir Group or generate 4.15% return on investment over 90 days.

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

Illinois Tool Works  vs.  The Weir Group

Illinois Tool Works

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Illinois Tool Works are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Illinois Tool is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Weir Group

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in The Weir Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Weir Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Illinois Tool and Weir Group

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

The idea behind Illinois Tool Works and The Weir Group 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.