Correlation Between Innospec and Quaker Chemical
Can any of the company-specific risk be diversified away by investing in both Innospec and Quaker Chemical 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 Quaker Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innospec and Quaker Chemical, you can compare the effects of market volatilities on Innospec and Quaker Chemical 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 Quaker Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innospec and Quaker Chemical.
Diversification Opportunities for Innospec and Quaker Chemical
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Innospec and Quaker is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and Quaker Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quaker Chemical 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 Quaker Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quaker Chemical has no effect on the direction of Innospec i.e., Innospec and Quaker Chemical go up and down completely randomly.
Pair Corralation between Innospec and Quaker Chemical
Given the investment horizon of 90 days Innospec is expected to generate 0.87 times more return on investment than Quaker Chemical. However, Innospec is 1.15 times less risky than Quaker Chemical. It trades about 0.05 of its potential returns per unit of risk. Quaker Chemical is currently generating about 0.01 per unit of risk. If you would invest 11,294 in Innospec on August 23, 2024 and sell it today you would earn a total of 540.00 from holding Innospec or generate 4.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innospec vs. Quaker Chemical
Performance |
| Timeline |
| Innospec |
| Quaker Chemical |
Innospec and Quaker Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innospec and Quaker Chemical
The main advantage of trading using opposite Innospec and Quaker Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innospec position performs unexpectedly, Quaker Chemical 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 Quaker Chemical will offset losses from the drop in Quaker Chemical's long position.| Innospec vs. Minerals Technologies | Innospec vs. Oil Dri | Innospec vs. Quaker Chemical | Innospec vs. Sensient Technologies |
| Quaker Chemical vs. Minerals Technologies | Quaker Chemical vs. Innospec | Quaker Chemical vs. H B Fuller | Quaker Chemical vs. Cabot |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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