Correlation Between Innospec and WD 40
Can any of the company-specific risk be diversified away by investing in both Innospec and WD 40 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 WD 40 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innospec and WD 40 Company, you can compare the effects of market volatilities on Innospec and WD 40 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 WD 40. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innospec and WD 40.
Diversification Opportunities for Innospec and WD 40
Poor diversification
The 3 months correlation between Innospec and WDFC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and WD 40 Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WD 40 Company 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 WD 40. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WD 40 Company has no effect on the direction of Innospec i.e., Innospec and WD 40 go up and down completely randomly.
Pair Corralation between Innospec and WD 40
Given the investment horizon of 90 days Innospec is expected to generate 2.05 times more return on investment than WD 40. However, Innospec is 2.05 times more volatile than WD 40 Company. It trades about 0.12 of its potential returns per unit of risk. WD 40 Company is currently generating about 0.19 per unit of risk. If you would invest 10,929 in Innospec on August 29, 2024 and sell it today you would earn a total of 836.00 from holding Innospec or generate 7.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innospec vs. WD 40 Company
Performance |
| Timeline |
| Innospec |
| WD 40 Company |
Innospec and WD 40 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innospec and WD 40
The main advantage of trading using opposite Innospec and WD 40 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innospec position performs unexpectedly, WD 40 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 WD 40 will offset losses from the drop in WD 40's long position.| Innospec vs. Minerals Technologies | Innospec vs. Oil Dri | Innospec vs. Quaker Chemical | Innospec vs. Sensient Technologies |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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