Correlation Between Hexcel and Innovative Solutions
Can any of the company-specific risk be diversified away by investing in both Hexcel and Innovative Solutions 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 Hexcel and Innovative Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hexcel and Innovative Solutions and, you can compare the effects of market volatilities on Hexcel and Innovative Solutions 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 Hexcel with a short position of Innovative Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hexcel and Innovative Solutions.
Diversification Opportunities for Hexcel and Innovative Solutions
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Hexcel and Innovative is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Hexcel and Innovative Solutions and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Solutions and and Hexcel 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 Hexcel are associated (or correlated) with Innovative Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Solutions and has no effect on the direction of Hexcel i.e., Hexcel and Innovative Solutions go up and down completely randomly.
Pair Corralation between Hexcel and Innovative Solutions
Considering the 90-day investment horizon Hexcel is expected to generate 35.73 times less return on investment than Innovative Solutions. But when comparing it to its historical volatility, Hexcel is 1.12 times less risky than Innovative Solutions. It trades about 0.01 of its potential returns per unit of risk. Innovative Solutions and is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 636.00 in Innovative Solutions and on August 26, 2024 and sell it today you would earn a total of 134.00 from holding Innovative Solutions and or generate 21.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hexcel vs. Innovative Solutions and
Performance |
| Timeline |
| Hexcel |
| Innovative Solutions and |
Hexcel and Innovative Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hexcel and Innovative Solutions
The main advantage of trading using opposite Hexcel and Innovative Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hexcel position performs unexpectedly, Innovative Solutions 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 Innovative Solutions will offset losses from the drop in Innovative Solutions' long position.The idea behind Hexcel and Innovative Solutions and 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.| Innovative Solutions vs. Park Electrochemical | Innovative Solutions vs. VSE Corporation | Innovative Solutions vs. Curtiss Wright | Innovative Solutions vs. Ducommun Incorporated |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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