Correlation Between SIFCO Industries and Innovative Solutions

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

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

Diversification Opportunities for SIFCO Industries and Innovative Solutions

0.81

Correlation Coefficient

SIFCO Industries  Innovative Solutions

Very poor diversification

The 3 months correlation between SIFCO and Innovative is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SIFCO Industries and Innovative Solutions and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Solutions and and SIFCO Industries 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 SIFCO Industries are associated (or correlated) with Innovative Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Solutions and has no effect on the direction of SIFCO Industries i.e., SIFCO Industries and Innovative Solutions go up and down completely randomly.

Pair Corralation between SIFCO Industries and Innovative Solutions

Considering the 90-day investment horizon SIFCO Industries is expected to under-perform the Innovative Solutions. But the stock apears to be less risky and, when comparing its historical volatility, SIFCO Industries is 1.68 times less risky than Innovative Solutions. The stock trades about -0.17 of its potential returns per unit of risk. The Innovative Solutions and is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  855.00  in Innovative Solutions and on December 29, 2024 and sell it today you would lose (184.00) from holding Innovative Solutions and or give up 21.52% of portfolio value over 90 days.

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

SIFCO Industries  vs.  Innovative Solutions and

SIFCO Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days SIFCO Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Innovative Solutions and

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovative Solutions and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with SIFCO Industries and Innovative Solutions

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

The idea behind SIFCO Industries and Innovative Solutions and 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.