Correlation Between 5E Advanced and Innospec
Can any of the company-specific risk be diversified away by investing in both 5E Advanced 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 5E Advanced and Innospec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 5E Advanced Materials and Innospec, you can compare the effects of market volatilities on 5E Advanced 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 5E Advanced with a short position of Innospec. Check out your portfolio center. Please also check ongoing floating volatility patterns of 5E Advanced and Innospec.
Diversification Opportunities for 5E Advanced and Innospec
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FEAM and Innospec is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding 5E Advanced Materials and Innospec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innospec and 5E Advanced 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 5E Advanced Materials 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 5E Advanced i.e., 5E Advanced and Innospec go up and down completely randomly.
Pair Corralation between 5E Advanced and Innospec
Given the investment horizon of 90 days 5E Advanced Materials is expected to generate 2.83 times more return on investment than Innospec. However, 5E Advanced is 2.83 times more volatile than Innospec. It trades about 0.01 of its potential returns per unit of risk. Innospec is currently generating about -0.12 per unit of risk. If you would invest 398.00 in 5E Advanced Materials on March 22, 2025 and sell it today you would lose (25.00) from holding 5E Advanced Materials or give up 6.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
5E Advanced Materials vs. Innospec
Performance |
| Timeline |
| 5E Advanced Materials |
| Innospec |
5E Advanced and Innospec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 5E Advanced and Innospec
The main advantage of trading using opposite 5E Advanced and Innospec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 5E Advanced 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.| 5E Advanced vs. Innospec | 5E Advanced vs. Minerals Technologies | 5E Advanced vs. Oil Dri | 5E Advanced vs. Quaker Chemical |
| 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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