Correlation Between Independent Bank and Innospec
Can any of the company-specific risk be diversified away by investing in both Independent Bank and Innospec 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 Independent Bank and Innospec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Independent Bank and Innospec, you can compare the effects of market volatilities on Independent Bank and Innospec 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 Independent Bank with a short position of Innospec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Independent Bank and Innospec.
Diversification Opportunities for Independent Bank and Innospec
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Independent and Innospec is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Independent Bank and Innospec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innospec and Independent Bank 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 Independent Bank are associated (or correlated) with Innospec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innospec has no effect on the direction of Independent Bank i.e., Independent Bank and Innospec go up and down completely randomly.
Pair Corralation between Independent Bank and Innospec
Given the investment horizon of 90 days Independent Bank is expected to generate 1.2 times more return on investment than Innospec. However, Independent Bank is 1.2 times more volatile than Innospec. It trades about 0.2 of its potential returns per unit of risk. Innospec is currently generating about 0.13 per unit of risk. If you would invest 6,317 in Independent Bank on August 30, 2024 and sell it today you would earn a total of 1,019 from holding Independent Bank or generate 16.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Independent Bank vs. Innospec
Performance |
| Timeline |
| Independent Bank |
| Innospec |
Independent Bank and Innospec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Independent Bank and Innospec
The main advantage of trading using opposite Independent Bank and Innospec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Independent Bank position performs unexpectedly, Innospec 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 Innospec will offset losses from the drop in Innospec's long position.| Independent Bank vs. Capitol Federal Financial | Independent Bank vs. BankFinancial | Independent Bank vs. Business First Bancshares | Independent Bank vs. First Bancorp |
| Innospec vs. Minerals Technologies | Innospec vs. Oil Dri | Innospec vs. Quaker Chemical | Innospec vs. Sensient Technologies |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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