Correlation Between J J and Innospec
Can any of the company-specific risk be diversified away by investing in both J J and Innospec 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 J J and Innospec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between J J Snack and Innospec, you can compare the effects of market volatilities on J J and Innospec 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 J J with a short position of Innospec. Check out your portfolio center. Please also check ongoing floating volatility patterns of J J and Innospec.
Diversification Opportunities for J J and Innospec
Poor diversification
The 3 months correlation between JJSF and Innospec is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding J J Snack and Innospec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innospec and J J 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 J J Snack are associated (or correlated) with Innospec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innospec has no effect on the direction of J J i.e., J J and Innospec go up and down completely randomly.
Pair Corralation between J J and Innospec
Given the investment horizon of 90 days J J Snack is expected to generate 0.95 times more return on investment than Innospec. However, J J Snack is 1.05 times less risky than Innospec. It trades about 0.06 of its potential returns per unit of risk. Innospec is currently generating about 0.0 per unit of risk. If you would invest 14,303 in J J Snack on August 27, 2024 and sell it today you would earn a total of 2,813 from holding J J Snack or generate 19.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
J J Snack vs. Innospec
Performance |
| Timeline |
| J J Snack |
| Innospec |
J J and Innospec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with J J and Innospec
The main advantage of trading using opposite J J and Innospec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if J J position performs unexpectedly, Innospec 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 Innospec will offset losses from the drop in Innospec's long position.The idea behind J J Snack and Innospec 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.| 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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