Correlation Between Innodata and Information Services

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

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

Diversification Opportunities for Innodata and Information Services

0.58

Correlation Coefficient

Innodata  Information Services

Very weak diversification

The 3 months correlation between Innodata and Information is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Innodata and Information Services Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services and Innodata 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 Innodata are associated (or correlated) with Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of Innodata i.e., Innodata and Information Services go up and down completely randomly.

Pair Corralation between Innodata and Information Services

Given the investment horizon of 90 days Innodata is expected to generate 5.49 times more return on investment than Information Services. However, Innodata is 5.49 times more volatile than Information Services Group. It trades about 0.18 of its potential returns per unit of risk. Information Services Group is currently generating about 0.15 per unit of risk. If you would invest  1,591  in Innodata on September 3, 2024 and sell it today you would earn a total of  2,461  from holding Innodata or generate 154.68% return on investment over 90 days.

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

Innodata  vs.  Information Services Group

Innodata

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innodata are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Innodata exhibited solid returns over the last few months and may actually be approaching a breakup point.

Information Services

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Information Services demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innodata and Information Services

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

The idea behind Innodata and Information Services Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.