Correlation Between Deluxe and Innodata

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

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

Diversification Opportunities for Deluxe and Innodata

-0.56

Correlation Coefficient

Deluxe  Innodata

Excellent diversification

The 3 months correlation between Deluxe and Innodata is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Deluxe and Innodata in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innodata and Deluxe 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 Deluxe are associated (or correlated) with Innodata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innodata has no effect on the direction of Deluxe i.e., Deluxe and Innodata go up and down completely randomly.

Pair Corralation between Deluxe and Innodata

Considering the 90-day investment horizon Deluxe is expected to under-perform the Innodata. But the stock apears to be less risky and, when comparing its historical volatility, Deluxe is 3.19 times less risky than Innodata. The stock trades about -0.21 of its potential returns per unit of risk. The Innodata is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,209  in Innodata on December 29, 2024 and sell it today you would lose (470.00) from holding Innodata or give up 11.17% of portfolio value over 90 days.

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

Deluxe  vs.  Innodata

Deluxe

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deluxe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Innodata

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Deluxe and Innodata

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

The idea behind Deluxe and Innodata 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.