Correlation Between INNOX Advanced and Lake Materials
Can any of the company-specific risk be diversified away by investing in both INNOX Advanced and Lake Materials 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 INNOX Advanced and Lake Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INNOX Advanced Materials and Lake Materials Co, you can compare the effects of market volatilities on INNOX Advanced and Lake Materials 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 INNOX Advanced with a short position of Lake Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of INNOX Advanced and Lake Materials.
Diversification Opportunities for INNOX Advanced and Lake Materials
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between INNOX and Lake is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding INNOX Advanced Materials and Lake Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Materials and INNOX Advanced 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 INNOX Advanced Materials are associated (or correlated) with Lake Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Materials has no effect on the direction of INNOX Advanced i.e., INNOX Advanced and Lake Materials go up and down completely randomly.
Pair Corralation between INNOX Advanced and Lake Materials
Assuming the 90 days trading horizon INNOX Advanced Materials is expected to generate 0.75 times more return on investment than Lake Materials. However, INNOX Advanced Materials is 1.34 times less risky than Lake Materials. It trades about -0.29 of its potential returns per unit of risk. Lake Materials Co is currently generating about -0.41 per unit of risk. If you would invest 2,490,000 in INNOX Advanced Materials on September 3, 2024 and sell it today you would lose (345,000) from holding INNOX Advanced Materials or give up 13.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
INNOX Advanced Materials vs. Lake Materials Co
Performance |
| Timeline |
| INNOX Advanced Materials |
| Lake Materials |
INNOX Advanced and Lake Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INNOX Advanced and Lake Materials
The main advantage of trading using opposite INNOX Advanced and Lake Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INNOX Advanced position performs unexpectedly, Lake Materials 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 Lake Materials will offset losses from the drop in Lake Materials' long position.| INNOX Advanced vs. SK Hynix | INNOX Advanced vs. LX Semicon Co | INNOX Advanced vs. Tokai Carbon Korea | INNOX Advanced vs. People Technology |
| Lake Materials vs. Lotte Data Communication | Lake Materials vs. Ssangyong Information Communication | Lake Materials vs. Digital Power Communications | Lake Materials vs. Hyundai Home Shopping |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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