Correlation Between Innospec and Lightwave Logic
Can any of the company-specific risk be diversified away by investing in both Innospec and Lightwave Logic 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 Lightwave Logic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innospec and Lightwave Logic, you can compare the effects of market volatilities on Innospec and Lightwave Logic 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 Lightwave Logic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innospec and Lightwave Logic.
Diversification Opportunities for Innospec and Lightwave Logic
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Innospec and Lightwave is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and Lightwave Logic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lightwave Logic 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 Lightwave Logic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lightwave Logic has no effect on the direction of Innospec i.e., Innospec and Lightwave Logic go up and down completely randomly.
Pair Corralation between Innospec and Lightwave Logic
Given the investment horizon of 90 days Innospec is expected to generate 0.52 times more return on investment than Lightwave Logic. However, Innospec is 1.94 times less risky than Lightwave Logic. It trades about 0.13 of its potential returns per unit of risk. Lightwave Logic is currently generating about -0.12 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 Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innospec vs. Lightwave Logic
Performance |
| Timeline |
| Innospec |
| Lightwave Logic |
Innospec and Lightwave Logic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innospec and Lightwave Logic
The main advantage of trading using opposite Innospec and Lightwave Logic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innospec position performs unexpectedly, Lightwave Logic 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 Lightwave Logic will offset losses from the drop in Lightwave Logic's long position.| Innospec vs. Minerals Technologies | Innospec vs. Oil Dri | Innospec vs. Quaker Chemical | Innospec vs. Sensient Technologies |
| Lightwave Logic vs. H B Fuller | Lightwave Logic vs. Element Solutions | Lightwave Logic vs. Innospec | Lightwave Logic 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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