Correlation Between Illinois Tool and VF

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

Diversification Opportunities for Illinois Tool and VF

-0.3

Correlation Coefficient

Illinois Tool  VF

Very good diversification

The 3 months correlation between Illinois and VF is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and VF Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VF Corporation 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 VF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VF Corporation has no effect on the direction of Illinois Tool i.e., Illinois Tool and VF go up and down completely randomly.

Pair Corralation between Illinois Tool and VF

Considering the 90-day investment horizon Illinois Tool Works is expected to generate 0.25 times more return on investment than VF. However, Illinois Tool Works is 3.94 times less risky than VF. It trades about -0.22 of its potential returns per unit of risk. VF Corporation is currently generating about -0.25 per unit of risk. If you would invest  26,346  in Illinois Tool Works on January 17, 2024 and sell it today you would lose (963.00) from holding Illinois Tool Works or give up 3.66% of portfolio value over 90 days.

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

Illinois Tool Works  vs.  VF Corp.

Illinois Tool Works

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Illinois Tool Works are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

VF Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VF Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Illinois Tool and VF

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

The idea behind Illinois Tool Works and VF Corporation 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.