Correlation Between Innospec and NewMarket
Can any of the company-specific risk be diversified away by investing in both Innospec and NewMarket 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 NewMarket into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innospec and NewMarket, you can compare the effects of market volatilities on Innospec and NewMarket 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 NewMarket. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innospec and NewMarket.
Diversification Opportunities for Innospec and NewMarket
Modest diversification
The 3 months correlation between Innospec and NewMarket is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and NewMarket in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewMarket 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 NewMarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewMarket has no effect on the direction of Innospec i.e., Innospec and NewMarket go up and down completely randomly.
Pair Corralation between Innospec and NewMarket
Given the investment horizon of 90 days Innospec is expected to generate 2.03 times more return on investment than NewMarket. However, Innospec is 2.03 times more volatile than NewMarket. It trades about 0.13 of its potential returns per unit of risk. NewMarket is currently generating about 0.06 per unit of risk. If you would invest 10,907 in Innospec on August 31, 2024 and sell it today you would earn a total of 859.00 from holding Innospec or generate 7.88% 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. NewMarket
Performance |
| Timeline |
| Innospec |
| NewMarket |
Innospec and NewMarket Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innospec and NewMarket
The main advantage of trading using opposite Innospec and NewMarket positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innospec position performs unexpectedly, NewMarket 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 NewMarket will offset losses from the drop in NewMarket's long position.| Innospec vs. Minerals Technologies | Innospec vs. Oil Dri | Innospec vs. Quaker Chemical | Innospec vs. Sensient Technologies |
| NewMarket vs. H B Fuller | NewMarket vs. Minerals Technologies | NewMarket vs. Quaker Chemical | NewMarket vs. Oil Dri |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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