Correlation Between Innospec and Chaoda Modern

Can any of the company-specific risk be diversified away by investing in both Innospec and Chaoda Modern 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 Chaoda Modern into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Innospec and Chaoda Modern Agriculture, you can compare the effects of market volatilities on Innospec and Chaoda Modern 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 Chaoda Modern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innospec and Chaoda Modern.

Diversification Opportunities for Innospec and Chaoda Modern

0.0

Correlation Coefficient

Innospec  Chaoda Modern

Pay attention - limited upside

The 3 months correlation between Innospec and Chaoda is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and Chaoda Modern Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chaoda Modern Agriculture 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 Chaoda Modern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chaoda Modern Agriculture has no effect on the direction of Innospec i.e., Innospec and Chaoda Modern go up and down completely randomly.

Pair Corralation between Innospec and Chaoda Modern

If you would invest  12,264  in Innospec on February 19, 2024 and sell it today you would earn a total of  686.00  from holding Innospec or generate 5.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Innospec  vs.  Chaoda Modern Agriculture

Innospec

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Innospec are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Innospec is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Chaoda Modern Agriculture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chaoda Modern Agriculture has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Chaoda Modern is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Innospec and Chaoda Modern

The main advantage of trading using opposite Innospec and Chaoda Modern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innospec position performs unexpectedly, Chaoda Modern 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 Chaoda Modern will offset losses from the drop in Chaoda Modern's long position.

The idea behind Innospec and Chaoda Modern Agriculture 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.