Correlation Between INNOX Advanced and APS Holdings

Can any of the company-specific risk be diversified away by investing in both INNOX Advanced and APS Holdings 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 APS Holdings 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 APS Holdings, you can compare the effects of market volatilities on INNOX Advanced and APS Holdings 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 APS Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of INNOX Advanced and APS Holdings.

Diversification Opportunities for INNOX Advanced and APS Holdings

0.28

Correlation Coefficient

INNOX Advanced  APS Holdings

Modest diversification

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

Pair Corralation between INNOX Advanced and APS Holdings

Assuming the 90 days trading horizon INNOX Advanced Materials is expected to under-perform the APS Holdings. In addition to that, INNOX Advanced is 1.22 times more volatile than APS Holdings. It trades about -0.09 of its total potential returns per unit of risk. APS Holdings is currently generating about -0.02 per unit of volatility. If you would invest  548,000  in APS Holdings on October 9, 2024 and sell it today you would lose (22,000) from holding APS Holdings or give up 4.01% of portfolio value over 90 days.

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

INNOX Advanced Materials  vs.  APS Holdings

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

APS Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with INNOX Advanced and APS Holdings

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

The idea behind INNOX Advanced Materials and APS Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.