Correlation Between Cabot and Incitec Pivot

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

By analyzing existing cross correlation between Cabot and Incitec Pivot Ltd, you can compare the effects of market volatilities on Cabot and Incitec Pivot 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 Cabot with a short position of Incitec Pivot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabot and Incitec Pivot.

Diversification Opportunities for Cabot and Incitec Pivot

0.37

Correlation Coefficient

Cabot  Incitec Pivot

Weak diversification

The 3 months correlation between Cabot and Incitec is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Cabot and Incitec Pivot Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incitec Pivot and Cabot 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 Cabot are associated (or correlated) with Incitec Pivot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incitec Pivot has no effect on the direction of Cabot i.e., Cabot and Incitec Pivot go up and down completely randomly.

Pair Corralation between Cabot and Incitec Pivot

Considering the 90-day investment horizon Cabot is expected to under-perform the Incitec Pivot. But the stock apears to be less risky and, when comparing its historical volatility, Cabot is 2.02 times less risky than Incitec Pivot. The stock trades about -0.72 of its potential returns per unit of risk. The Incitec Pivot Ltd is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  195.00  in Incitec Pivot Ltd on October 8, 2024 and sell it today you would earn a total of  26.00  from holding Incitec Pivot Ltd or generate 13.33% return on investment over 90 days.

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

Cabot  vs.  Incitec Pivot Ltd

Cabot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cabot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Incitec Pivot

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Incitec Pivot Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Incitec Pivot showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cabot and Incitec Pivot

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

The idea behind Cabot and Incitec Pivot Ltd 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.