Correlation Between Innospec and Loop Industries
Can any of the company-specific risk be diversified away by investing in both Innospec and Loop Industries 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 Loop Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innospec and Loop Industries, you can compare the effects of market volatilities on Innospec and Loop Industries 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 Loop Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innospec and Loop Industries.
Diversification Opportunities for Innospec and Loop Industries
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Innospec and Loop is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and Loop Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loop Industries 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 Loop Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loop Industries has no effect on the direction of Innospec i.e., Innospec and Loop Industries go up and down completely randomly.
Pair Corralation between Innospec and Loop Industries
Given the investment horizon of 90 days Innospec is expected to generate 1.11 times less return on investment than Loop Industries. But when comparing it to its historical volatility, Innospec is 4.08 times less risky than Loop Industries. It trades about 0.07 of its potential returns per unit of risk. Loop Industries is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 131.00 in Loop Industries on November 1, 2024 and sell it today you would lose (13.00) from holding Loop Industries or give up 9.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innospec vs. Loop Industries
Performance |
| Timeline |
| Innospec |
| Loop Industries |
Innospec and Loop Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innospec and Loop Industries
The main advantage of trading using opposite Innospec and Loop Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innospec position performs unexpectedly, Loop Industries 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 Loop Industries will offset losses from the drop in Loop Industries' long position.| Innospec vs. Minerals Technologies | Innospec vs. Oil Dri | Innospec vs. Quaker Chemical | Innospec vs. Sensient Technologies |
| Loop Industries vs. H B Fuller | Loop Industries vs. Element Solutions | Loop Industries vs. Innospec | Loop Industries 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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