Correlation Between Innospec and H B
Can any of the company-specific risk be diversified away by investing in both Innospec and H B 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 H B into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innospec and H B Fuller, you can compare the effects of market volatilities on Innospec and H B 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 H B. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innospec and H B.
Diversification Opportunities for Innospec and H B
Poor diversification
The 3 months correlation between Innospec and FUL is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and H B Fuller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H B Fuller 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 H B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H B Fuller has no effect on the direction of Innospec i.e., Innospec and H B go up and down completely randomly.
Pair Corralation between Innospec and H B
Given the investment horizon of 90 days Innospec is expected to under-perform the H B. In addition to that, Innospec is 1.15 times more volatile than H B Fuller. It trades about -0.18 of its total potential returns per unit of risk. H B Fuller is currently generating about -0.05 per unit of volatility. If you would invest 6,186 in H B Fuller on November 18, 2024 and sell it today you would lose (99.00) from holding H B Fuller or give up 1.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innospec vs. H B Fuller
Performance |
| Timeline |
| Innospec |
| H B Fuller |
Innospec and H B Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innospec and H B
The main advantage of trading using opposite Innospec and H B positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innospec position performs unexpectedly, H B 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 H B will offset losses from the drop in H B's long position.| 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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