Correlation Between Innospec and John B
Can any of the company-specific risk be diversified away by investing in both Innospec and John 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 John B into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innospec and John B Sanfilippo, you can compare the effects of market volatilities on Innospec and John 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 John B. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innospec and John B.
Diversification Opportunities for Innospec and John B
Excellent diversification
The 3 months correlation between Innospec and John is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and John B Sanfilippo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John B Sanfilippo 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 John B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John B Sanfilippo has no effect on the direction of Innospec i.e., Innospec and John B go up and down completely randomly.
Pair Corralation between Innospec and John B
Given the investment horizon of 90 days Innospec is expected to generate 1.11 times more return on investment than John B. However, Innospec is 1.11 times more volatile than John B Sanfilippo. It trades about 0.13 of its potential returns per unit of risk. John B Sanfilippo is currently generating about -0.14 per unit of risk. If you would invest 10,855 in Innospec on August 30, 2024 and sell it today you would earn a total of 910.00 from holding Innospec or generate 8.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innospec vs. John B Sanfilippo
Performance |
| Timeline |
| Innospec |
| John B Sanfilippo |
Innospec and John B Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innospec and John B
The main advantage of trading using opposite Innospec and John B positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innospec position performs unexpectedly, John 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 John B will offset losses from the drop in John 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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