Correlation Between Dupont De and INNOX Advanced

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

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

Diversification Opportunities for Dupont De and INNOX Advanced

0.03

Correlation Coefficient

Dupont De  INNOX Advanced

Significant diversification

The 3 months correlation between Dupont and INNOX is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and INNOX Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INNOX Advanced Materials and Dupont De 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 Dupont De Nemours are associated (or correlated) with INNOX Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INNOX Advanced Materials has no effect on the direction of Dupont De i.e., Dupont De and INNOX Advanced go up and down completely randomly.

Pair Corralation between Dupont De and INNOX Advanced

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the INNOX Advanced. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 2.47 times less risky than INNOX Advanced. The stock trades about -0.02 of its potential returns per unit of risk. The INNOX Advanced Materials is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,054,747  in INNOX Advanced Materials on December 1, 2024 and sell it today you would earn a total of  780,253  from holding INNOX Advanced Materials or generate 37.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

Dupont De Nemours  vs.  INNOX Advanced Materials

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

INNOX Advanced Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INNOX Advanced Materials are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, INNOX Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and INNOX Advanced

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

The idea behind Dupont De Nemours and INNOX Advanced Materials 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.