Correlation Between Ingredion Incorporated and Lancashire Holdings

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

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

Diversification Opportunities for Ingredion Incorporated and Lancashire Holdings

-0.76

Correlation Coefficient

Ingredion Incorporated  Lancashire Holdings

Pay attention - limited upside

The 3 months correlation between Ingredion and Lancashire is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ingredion Incorporated and Lancashire Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancashire Holdings and Ingredion Incorporated 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 Ingredion Incorporated are associated (or correlated) with Lancashire Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancashire Holdings has no effect on the direction of Ingredion Incorporated i.e., Ingredion Incorporated and Lancashire Holdings go up and down completely randomly.

Pair Corralation between Ingredion Incorporated and Lancashire Holdings

Given the investment horizon of 90 days Ingredion Incorporated is expected to under-perform the Lancashire Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Ingredion Incorporated is 2.3 times less risky than Lancashire Holdings. The stock trades about -0.44 of its potential returns per unit of risk. The Lancashire Holdings is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  771.00  in Lancashire Holdings on October 10, 2024 and sell it today you would earn a total of  60.00  from holding Lancashire Holdings or generate 7.78% return on investment over 90 days.

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

Ingredion Incorporated  vs.  Lancashire Holdings

Ingredion Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ingredion Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Ingredion Incorporated is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Lancashire Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ingredion Incorporated and Lancashire Holdings

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

The idea behind Ingredion Incorporated and Lancashire Holdings 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.