Correlation Between Innospec and Flexible Solutions

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Innospec and Flexible 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 Innospec and Flexible Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innospec and Flexible Solutions International, you can compare the effects of market volatilities on Innospec and Flexible 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 Innospec with a short position of Flexible Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innospec and Flexible Solutions.

Diversification Opportunities for Innospec and Flexible Solutions

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Innospec and Flexible is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions and Innospec 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 Innospec are associated (or correlated) with Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of Innospec i.e., Innospec and Flexible Solutions go up and down completely randomly.

Pair Corralation between Innospec and Flexible Solutions

Given the investment horizon of 90 days Innospec is expected to generate 0.26 times more return on investment than Flexible Solutions. However, Innospec is 3.92 times less risky than Flexible Solutions. It trades about -0.26 of its potential returns per unit of risk. Flexible Solutions International is currently generating about -0.15 per unit of risk. If you would invest  12,355  in Innospec on September 12, 2024 and sell it today you would lose (724.00) from holding Innospec or give up 5.86% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Innospec  vs.  Flexible Solutions Internation

 Performance 
       Timeline  
Innospec 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Innospec are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Innospec may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Flexible Solutions 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Flexible Solutions demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Innospec and Flexible Solutions Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Innospec and Flexible Solutions

The main advantage of trading using opposite Innospec and Flexible Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innospec position performs unexpectedly, Flexible 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 Flexible Solutions will offset losses from the drop in Flexible Solutions' long position.
The idea behind Innospec and Flexible Solutions International 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

Other Complementary Tools

ETF Categories
List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments
Efficient Frontier
Plot and analyze your portfolio and positions against risk-return landscape of the market.
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon
Commodity Directory
Find actively traded commodities issued by global exchanges
My Watchlist Analysis
Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like