Correlation Between Ingevity Corp and Element Solutions
Can any of the company-specific risk be diversified away by investing in both Ingevity Corp and Element Solutions 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 Ingevity Corp and Element Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ingevity Corp and Element Solutions, you can compare the effects of market volatilities on Ingevity Corp and Element Solutions 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 Ingevity Corp with a short position of Element Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ingevity Corp and Element Solutions.
Diversification Opportunities for Ingevity Corp and Element Solutions
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ingevity and Element is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ingevity Corp and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Solutions and Ingevity Corp 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 Ingevity Corp are associated (or correlated) with Element Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Solutions has no effect on the direction of Ingevity Corp i.e., Ingevity Corp and Element Solutions go up and down completely randomly.
Pair Corralation between Ingevity Corp and Element Solutions
Given the investment horizon of 90 days Ingevity Corp is expected to under-perform the Element Solutions. In addition to that, Ingevity Corp is 1.63 times more volatile than Element Solutions. It trades about -0.01 of its total potential returns per unit of risk. Element Solutions is currently generating about 0.06 per unit of volatility. If you would invest 1,845 in Element Solutions on August 28, 2024 and sell it today you would earn a total of 1,088 from holding Element Solutions or generate 58.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ingevity Corp vs. Element Solutions
Performance |
| Timeline |
| Ingevity Corp |
| Element Solutions |
Ingevity Corp and Element Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ingevity Corp and Element Solutions
The main advantage of trading using opposite Ingevity Corp and Element Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ingevity Corp position performs unexpectedly, Element Solutions 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 Element Solutions will offset losses from the drop in Element Solutions' long position.| Ingevity Corp vs. Oil Dri | Ingevity Corp vs. H B Fuller | Ingevity Corp vs. Northern Technologies | Ingevity Corp vs. Cabot |
| Element Solutions vs. Oil Dri | Element Solutions vs. H B Fuller | Element Solutions vs. Northern Technologies | Element Solutions 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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