Correlation Between Innodata and FTI Consulting

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

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

Diversification Opportunities for Innodata and FTI Consulting

-0.72

Correlation Coefficient

Innodata  FTI Consulting

Pay attention - limited upside

The 3 months correlation between Innodata and FTI is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Innodata and FTI Consulting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTI Consulting and Innodata 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 Innodata are associated (or correlated) with FTI Consulting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTI Consulting has no effect on the direction of Innodata i.e., Innodata and FTI Consulting go up and down completely randomly.

Pair Corralation between Innodata and FTI Consulting

Given the investment horizon of 90 days Innodata is expected to generate 5.85 times more return on investment than FTI Consulting. However, Innodata is 5.85 times more volatile than FTI Consulting. It trades about 0.18 of its potential returns per unit of risk. FTI Consulting is currently generating about -0.07 per unit of risk. If you would invest  1,591  in Innodata on August 31, 2024 and sell it today you would earn a total of  2,517  from holding Innodata or generate 158.2% return on investment over 90 days.

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

Innodata  vs.  FTI Consulting

Innodata

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innodata are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Innodata exhibited solid returns over the last few months and may actually be approaching a breakup point.

FTI Consulting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FTI Consulting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Innodata and FTI Consulting

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

The idea behind Innodata and FTI Consulting 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.