Correlation Between Innospec and Sasol
Can any of the company-specific risk be diversified away by investing in both Innospec and Sasol 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 Sasol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innospec and Sasol, you can compare the effects of market volatilities on Innospec and Sasol 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 Sasol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innospec and Sasol.
Diversification Opportunities for Innospec and Sasol
Very good diversification
The 3 months correlation between Innospec and Sasol is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and Sasol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sasol 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 Sasol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sasol has no effect on the direction of Innospec i.e., Innospec and Sasol go up and down completely randomly.
Pair Corralation between Innospec and Sasol
Given the investment horizon of 90 days Innospec is expected to generate 1.0 times more return on investment than Sasol. However, Innospec is 1.0 times more volatile than Sasol. It trades about 0.16 of its potential returns per unit of risk. Sasol is currently generating about -0.13 per unit of risk. If you would invest 10,929 in Innospec on August 27, 2024 and sell it today you would earn a total of 1,066 from holding Innospec or generate 9.75% 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. Sasol
Performance |
| Timeline |
| Innospec |
| Sasol |
Innospec and Sasol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innospec and Sasol
The main advantage of trading using opposite Innospec and Sasol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innospec position performs unexpectedly, Sasol 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 Sasol will offset losses from the drop in Sasol's long position.The idea behind Innospec and Sasol pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Sasol vs. Olin Corporation | Sasol vs. Cabot | Sasol vs. Kronos Worldwide | Sasol vs. LyondellBasell Industries NV |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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