Correlation Between Quaker Chemical and Ingevity Corp

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

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

Diversification Opportunities for Quaker Chemical and Ingevity Corp

0.41

Correlation Coefficient

Quaker Chemical  Ingevity Corp

Very weak diversification

The 3 months correlation between Quaker and Ingevity is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Quaker Chemical and Ingevity Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ingevity Corp and Quaker Chemical 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 Quaker Chemical are associated (or correlated) with Ingevity Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ingevity Corp has no effect on the direction of Quaker Chemical i.e., Quaker Chemical and Ingevity Corp go up and down completely randomly.

Pair Corralation between Quaker Chemical and Ingevity Corp

Considering the 90-day investment horizon Quaker Chemical is expected to under-perform the Ingevity Corp. But the stock apears to be less risky and, when comparing its historical volatility, Quaker Chemical is 1.56 times less risky than Ingevity Corp. The stock trades about -0.05 of its potential returns per unit of risk. The Ingevity Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,015  in Ingevity Corp on December 29, 2024 and sell it today you would lose (53.00) from holding Ingevity Corp or give up 1.32% of portfolio value over 90 days.

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

Quaker Chemical  vs.  Ingevity Corp

Quaker Chemical

Risk-Adjusted Performance

Very Weak

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

Ingevity Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ingevity Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ingevity Corp is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Quaker Chemical and Ingevity Corp

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

The idea behind Quaker Chemical and Ingevity Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.