Correlation Between Innospec and Cabot
Can any of the company-specific risk be diversified away by investing in both Innospec and Cabot 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 Cabot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innospec and Cabot, you can compare the effects of market volatilities on Innospec and Cabot 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 Cabot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innospec and Cabot.
Diversification Opportunities for Innospec and Cabot
Very good diversification
The 3 months correlation between Innospec and Cabot is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and Cabot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot 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 Cabot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot has no effect on the direction of Innospec i.e., Innospec and Cabot go up and down completely randomly.
Pair Corralation between Innospec and Cabot
Given the investment horizon of 90 days Innospec is expected to generate 7.08 times less return on investment than Cabot. But when comparing it to its historical volatility, Innospec is 1.02 times less risky than Cabot. It trades about 0.05 of its potential returns per unit of risk. Cabot is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 10,118 in Cabot on July 2, 2024 and sell it today you would earn a total of 965.00 from holding Cabot or generate 9.54% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Innospec vs. Cabot
Performance |
Timeline |
Innospec |
Cabot |
Innospec and Cabot Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Innospec and Cabot
The main advantage of trading using opposite Innospec and Cabot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innospec position performs unexpectedly, Cabot 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 Cabot will offset losses from the drop in Cabot's long position.Innospec vs. Ecolab Inc | Innospec vs. Bank of America | Innospec vs. Dell Technologies | Innospec vs. PayPal Holdings |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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