Correlation Between Standex International and IDEX
Can any of the company-specific risk be diversified away by investing in both Standex International and IDEX 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 Standex International and IDEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standex International and IDEX Corporation, you can compare the effects of market volatilities on Standex International and IDEX 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 Standex International with a short position of IDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standex International and IDEX.
Diversification Opportunities for Standex International and IDEX
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Standex and IDEX is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Standex International and IDEX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEX and Standex International 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 Standex International are associated (or correlated) with IDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEX has no effect on the direction of Standex International i.e., Standex International and IDEX go up and down completely randomly.
Pair Corralation between Standex International and IDEX
Considering the 90-day investment horizon Standex International is expected to generate 1.4 times more return on investment than IDEX. However, Standex International is 1.4 times more volatile than IDEX Corporation. It trades about 0.06 of its potential returns per unit of risk. IDEX Corporation is currently generating about 0.0 per unit of risk. If you would invest 17,213 in Standex International on August 27, 2024 and sell it today you would earn a total of 3,249 from holding Standex International or generate 18.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standex International vs. IDEX Corp.
Performance |
| Timeline |
| Standex International |
| IDEX |
Standex International and IDEX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standex International and IDEX
The main advantage of trading using opposite Standex International and IDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standex International position performs unexpectedly, IDEX 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 IDEX will offset losses from the drop in IDEX's long position.The idea behind Standex International and IDEX Corporation 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.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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