Correlation Between Innolux Corp and Motech Industries

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

By analyzing existing cross correlation between Innolux Corp and Motech Industries Co, you can compare the effects of market volatilities on Innolux Corp and Motech Industries 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 Innolux Corp with a short position of Motech Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innolux Corp and Motech Industries.

Diversification Opportunities for Innolux Corp and Motech Industries

0.49

Correlation Coefficient

Innolux Corp  Motech Industries

Very weak diversification

The 3 months correlation between Innolux and Motech is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Innolux Corp and Motech Industries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motech Industries and Innolux Corp 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 Innolux Corp are associated (or correlated) with Motech Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motech Industries has no effect on the direction of Innolux Corp i.e., Innolux Corp and Motech Industries go up and down completely randomly.

Pair Corralation between Innolux Corp and Motech Industries

Assuming the 90 days trading horizon Innolux Corp is expected to generate 0.92 times more return on investment than Motech Industries. However, Innolux Corp is 1.09 times less risky than Motech Industries. It trades about 0.0 of its potential returns per unit of risk. Motech Industries Co is currently generating about -0.03 per unit of risk. If you would invest  1,550  in Innolux Corp on September 14, 2024 and sell it today you would lose (15.00) from holding Innolux Corp or give up 0.97% of portfolio value over 90 days.

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

Innolux Corp  vs.  Motech Industries Co

Innolux Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Innolux Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Innolux Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Motech Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Motech Industries Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Motech Industries is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Innolux Corp and Motech Industries

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

The idea behind Innolux Corp and Motech Industries 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.