Correlation Between ITT and Gorman Rupp

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

By analyzing existing cross correlation between ITT Inc and Gorman Rupp, you can compare the effects of market volatilities on ITT and Gorman Rupp 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 ITT with a short position of Gorman Rupp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITT and Gorman Rupp.

Diversification Opportunities for ITT and Gorman Rupp

0.86

Correlation Coefficient

ITT  Gorman Rupp

Very poor diversification

The 3 months correlation between ITT and Gorman is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ITT Inc and Gorman Rupp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gorman Rupp and ITT 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 ITT Inc are associated (or correlated) with Gorman Rupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gorman Rupp has no effect on the direction of ITT i.e., ITT and Gorman Rupp go up and down completely randomly.

Pair Corralation between ITT and Gorman Rupp

Considering the 90-day investment horizon ITT Inc is expected to generate 0.98 times more return on investment than Gorman Rupp. However, ITT Inc is 1.03 times less risky than Gorman Rupp. It trades about 0.07 of its potential returns per unit of risk. Gorman Rupp is currently generating about 0.05 per unit of risk. If you would invest  12,554  in ITT Inc on September 27, 2024 and sell it today you would earn a total of  1,897  from holding ITT Inc or generate 15.11% return on investment over 90 days.

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

ITT Inc  vs.  Gorman Rupp

ITT Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ITT is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Gorman Rupp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gorman Rupp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Gorman Rupp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ITT and Gorman Rupp

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

The idea behind ITT Inc and Gorman Rupp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.