Correlation Between Innospec and Independent Bank
Can any of the company-specific risk be diversified away by investing in both Innospec and Independent Bank 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 Independent Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innospec and Independent Bank, you can compare the effects of market volatilities on Innospec and Independent Bank 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 Independent Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innospec and Independent Bank.
Diversification Opportunities for Innospec and Independent Bank
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Innospec and Independent is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and Independent Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independent Bank 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 Independent Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independent Bank has no effect on the direction of Innospec i.e., Innospec and Independent Bank go up and down completely randomly.
Pair Corralation between Innospec and Independent Bank
Given the investment horizon of 90 days Innospec is expected to generate 52.11 times less return on investment than Independent Bank. But when comparing it to its historical volatility, Innospec is 1.24 times less risky than Independent Bank. It trades about 0.0 of its potential returns per unit of risk. Independent Bank is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,053 in Independent Bank on August 27, 2024 and sell it today you would earn a total of 2,345 from holding Independent Bank or generate 46.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innospec vs. Independent Bank
Performance |
| Timeline |
| Innospec |
| Independent Bank |
Innospec and Independent Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innospec and Independent Bank
The main advantage of trading using opposite Innospec and Independent Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innospec position performs unexpectedly, Independent Bank 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 Independent Bank will offset losses from the drop in Independent Bank's long position.| Innospec vs. Minerals Technologies | Innospec vs. Oil Dri | Innospec vs. Quaker Chemical | Innospec vs. Sensient Technologies |
| Independent Bank vs. Capitol Federal Financial | Independent Bank vs. BankFinancial | Independent Bank vs. Business First Bancshares | Independent Bank vs. First Bancorp |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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