Correlation Between Innodata and Sigma Labs

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

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

Diversification Opportunities for Innodata and Sigma Labs

-0.37

Correlation Coefficient

Innodata  Sigma Labs

Very good diversification

The 3 months correlation between Innodata and Sigma is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Innodata and Sigma Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sigma Labs 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 Sigma Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sigma Labs has no effect on the direction of Innodata i.e., Innodata and Sigma Labs go up and down completely randomly.

Pair Corralation between Innodata and Sigma Labs

Given the investment horizon of 90 days Innodata is expected to generate 1.09 times more return on investment than Sigma Labs. However, Innodata is 1.09 times more volatile than Sigma Labs. It trades about 0.1 of its potential returns per unit of risk. Sigma Labs is currently generating about -0.08 per unit of risk. If you would invest  339.00  in Innodata on October 5, 2024 and sell it today you would earn a total of  3,613  from holding Innodata or generate 1065.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	26.52%
Values	Daily Returns

Innodata  vs.  Sigma Labs

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.

Sigma Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sigma Labs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Sigma Labs is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Innodata and Sigma Labs

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

The idea behind Innodata and Sigma Labs 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.