Correlation Between Innospec and Hawkins

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

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

Diversification Opportunities for Innospec and Hawkins

0.66

Correlation Coefficient

Innospec  Hawkins

Poor diversification

The 3 months correlation between Innospec and Hawkins is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and Hawkins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawkins and Innospec 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 Innospec are associated (or correlated) with Hawkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawkins has no effect on the direction of Innospec i.e., Innospec and Hawkins go up and down completely randomly.

Pair Corralation between Innospec and Hawkins

Given the investment horizon of 90 days Innospec is expected to generate 0.71 times more return on investment than Hawkins. However, Innospec is 1.4 times less risky than Hawkins. It trades about -0.1 of its potential returns per unit of risk. Hawkins is currently generating about -0.09 per unit of risk. If you would invest  10,997  in Innospec on December 29, 2024 and sell it today you would lose (1,258) from holding Innospec or give up 11.44% of portfolio value over 90 days.

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

Innospec  vs.  Hawkins

Innospec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innospec has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Hawkins

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hawkins has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward-looking signals remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Innospec and Hawkins

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

The idea behind Innospec and Hawkins 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.