Correlation Between INNOX Advanced and BusinessOn Communication

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

By analyzing existing cross correlation between INNOX Advanced Materials and BusinessOn Communication Co, you can compare the effects of market volatilities on INNOX Advanced and BusinessOn Communication 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 INNOX Advanced with a short position of BusinessOn Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of INNOX Advanced and BusinessOn Communication.

Diversification Opportunities for INNOX Advanced and BusinessOn Communication

-0.28

Correlation Coefficient

INNOX Advanced  BusinessOn Communication

Very good diversification

The 3 months correlation between INNOX and BusinessOn is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding INNOX Advanced Materials and BusinessOn Communication Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BusinessOn Communication and INNOX 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 INNOX Advanced Materials are associated (or correlated) with BusinessOn Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BusinessOn Communication has no effect on the direction of INNOX Advanced i.e., INNOX Advanced and BusinessOn Communication go up and down completely randomly.

Pair Corralation between INNOX Advanced and BusinessOn Communication

Assuming the 90 days trading horizon INNOX Advanced is expected to generate 2.18 times less return on investment than BusinessOn Communication. But when comparing it to its historical volatility, INNOX Advanced Materials is 1.87 times less risky than BusinessOn Communication. It trades about 0.06 of its potential returns per unit of risk. BusinessOn Communication Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,437,000  in BusinessOn Communication Co on February 15, 2024 and sell it today you would earn a total of  63,000  from holding BusinessOn Communication Co or generate 4.38% return on investment over 90 days.

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

INNOX Advanced Materials  vs.  BusinessOn Communication Co

INNOX Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INNOX Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, INNOX Advanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BusinessOn Communication

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BusinessOn Communication Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BusinessOn Communication sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INNOX Advanced and BusinessOn Communication

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

The idea behind INNOX Advanced Materials and BusinessOn Communication Co 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.