Correlation Between Oil Dri and Innospec

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

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

Diversification Opportunities for Oil Dri and Innospec

-0.74

Correlation Coefficient

Oil Dri  Innospec

Pay attention - limited upside

The 3 months correlation between Oil and Innospec is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Oil Dri and Innospec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innospec and Oil Dri 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 Oil Dri are associated (or correlated) with Innospec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innospec has no effect on the direction of Oil Dri i.e., Oil Dri and Innospec go up and down completely randomly.

Pair Corralation between Oil Dri and Innospec

Considering the 90-day investment horizon Oil Dri is expected to generate 1.22 times more return on investment than Innospec. However, Oil Dri is 1.22 times more volatile than Innospec. It trades about 0.05 of its potential returns per unit of risk. Innospec is currently generating about -0.11 per unit of risk. If you would invest  4,355  in Oil Dri on December 28, 2024 and sell it today you would earn a total of  258.00  from holding Oil Dri or generate 5.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Oil Dri  vs.  Innospec

Oil Dri

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Dri are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Oil Dri may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Oil Dri and Innospec

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

The idea behind Oil Dri and Innospec 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.