Correlation Between Incitec Pivot and HEXPOL AB

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

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

Diversification Opportunities for Incitec Pivot and HEXPOL AB

0.24

Correlation Coefficient

Incitec Pivot  HEXPOL AB

Modest diversification

The 3 months correlation between Incitec and HEXPOL is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Incitec Pivot Ltd and HEXPOL AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEXPOL AB and Incitec Pivot 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 Incitec Pivot Ltd are associated (or correlated) with HEXPOL AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEXPOL AB has no effect on the direction of Incitec Pivot i.e., Incitec Pivot and HEXPOL AB go up and down completely randomly.

Pair Corralation between Incitec Pivot and HEXPOL AB

Assuming the 90 days horizon Incitec Pivot Ltd is expected to generate 1.25 times more return on investment than HEXPOL AB. However, Incitec Pivot is 1.25 times more volatile than HEXPOL AB. It trades about 0.01 of its potential returns per unit of risk. HEXPOL AB is currently generating about 0.0 per unit of risk. If you would invest  223.00  in Incitec Pivot Ltd on October 3, 2024 and sell it today you would lose (25.00) from holding Incitec Pivot Ltd or give up 11.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	79.35%
Values	Daily Returns

Incitec Pivot Ltd  vs.  HEXPOL AB

Incitec Pivot

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Incitec Pivot Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Incitec Pivot is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

HEXPOL AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEXPOL AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, HEXPOL AB is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Incitec Pivot and HEXPOL AB

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

The idea behind Incitec Pivot Ltd and HEXPOL AB 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.