Correlation Between ITT and Ingersoll Rand

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

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

Diversification Opportunities for ITT and Ingersoll Rand

0.9

Correlation Coefficient

ITT  Ingersoll Rand

Almost no diversification

The 3 months correlation between ITT and Ingersoll is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding ITT Inc and Ingersoll Rand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ingersoll Rand 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 Ingersoll Rand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ingersoll Rand has no effect on the direction of ITT i.e., ITT and Ingersoll Rand go up and down completely randomly.

Pair Corralation between ITT and Ingersoll Rand

Considering the 90-day investment horizon ITT Inc is expected to generate 0.97 times more return on investment than Ingersoll Rand. However, ITT Inc is 1.03 times less risky than Ingersoll Rand. It trades about 0.07 of its potential returns per unit of risk. Ingersoll Rand is currently generating about 0.02 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  1,876  from holding ITT Inc or generate 14.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.21%
Values	Daily Returns

ITT Inc  vs.  Ingersoll Rand

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.

Ingersoll Rand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ingersoll Rand has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Ingersoll Rand is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ITT and Ingersoll Rand

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

The idea behind ITT Inc and Ingersoll Rand 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.