Correlation Between Innospec and WD 40

Can any of the company-specific risk be diversified away by investing in both Innospec and WD 40 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 WD 40 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Innospec and WD 40 Company, you can compare the effects of market volatilities on Innospec and WD 40 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 WD 40. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innospec and WD 40.

Diversification Opportunities for Innospec and WD 40

0.85

Correlation Coefficient

Innospec  WD 40

Very poor diversification

The 3 months correlation between Innospec and WDFC is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and WD 40 Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WD 40 Company 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 WD 40. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WD 40 Company has no effect on the direction of Innospec i.e., Innospec and WD 40 go up and down completely randomly.

Pair Corralation between Innospec and WD 40

Given the investment horizon of 90 days Innospec is expected to under-perform the WD 40. But the stock apears to be less risky and, when comparing its historical volatility, Innospec is 1.05 times less risky than WD 40. The stock trades about -0.14 of its potential returns per unit of risk. The WD 40 Company is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  21,255  in WD 40 Company on September 2, 2025 and sell it today you would lose (1,675) from holding WD 40 Company or give up 7.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Innospec  vs.  WD 40 Company

Innospec

Risk-Adjusted Performance

Weakest

Over the last 90 days Innospec has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2026. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

WD 40 Company

Risk-Adjusted Performance

Weakest

Over the last 90 days WD 40 Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Innospec and WD 40

The main advantage of trading using opposite Innospec and WD 40 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innospec position performs unexpectedly, WD 40 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 WD 40 will offset losses from the drop in WD 40's long position.

The idea behind Innospec and WD 40 Company 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.