Correlation Between Innospec and Inter Parfums

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

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

Diversification Opportunities for Innospec and Inter Parfums

-0.08

Correlation Coefficient

Innospec  Inter Parfums

Good diversification

The 3 months correlation between Innospec and Inter is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and Inter Parfums in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Parfums 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 Inter Parfums. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Parfums has no effect on the direction of Innospec i.e., Innospec and Inter Parfums go up and down completely randomly.

Pair Corralation between Innospec and Inter Parfums

Given the investment horizon of 90 days Innospec is expected to generate 0.64 times more return on investment than Inter Parfums. However, Innospec is 1.57 times less risky than Inter Parfums. It trades about 0.06 of its potential returns per unit of risk. Inter Parfums is currently generating about -0.11 per unit of risk. If you would invest  12,195  in Innospec on March 14, 2024 and sell it today you would earn a total of  545.00  from holding Innospec or generate 4.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Innospec  vs.  Inter Parfums

Innospec

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Innospec are ranked lower than 4 (%) 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 newest stock price agitation, may contribute to short-term losses for the retail investors.

Inter Parfums

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inter Parfums has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in July 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Innospec and Inter Parfums

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

The idea behind Innospec and Inter Parfums 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.