Correlation Between LAKE MATERIALS and Innowireless

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

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

Diversification Opportunities for LAKE MATERIALS and Innowireless

-0.7

Correlation Coefficient

LAKE MATERIALS  Innowireless

Excellent diversification

The 3 months correlation between LAKE and Innowireless is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding LAKE MATERIALS LTD and Innowireless Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innowireless and LAKE MATERIALS 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 LAKE MATERIALS LTD are associated (or correlated) with Innowireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innowireless has no effect on the direction of LAKE MATERIALS i.e., LAKE MATERIALS and Innowireless go up and down completely randomly.

Pair Corralation between LAKE MATERIALS and Innowireless

Assuming the 90 days trading horizon LAKE MATERIALS LTD is expected to under-perform the Innowireless. In addition to that, LAKE MATERIALS is 1.26 times more volatile than Innowireless Co. It trades about -0.2 of its total potential returns per unit of risk. Innowireless Co is currently generating about 0.12 per unit of volatility. If you would invest  1,617,000  in Innowireless Co on September 12, 2024 and sell it today you would earn a total of  287,000  from holding Innowireless Co or generate 17.75% return on investment over 90 days.

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

LAKE MATERIALS LTD  vs.  Innowireless Co

LAKE MATERIALS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAKE MATERIALS LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Innowireless

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innowireless Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Innowireless sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LAKE MATERIALS and Innowireless

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

The idea behind LAKE MATERIALS LTD and Innowireless Co 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.