Correlation Between Innospec and Energizer Holdings

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

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

Diversification Opportunities for Innospec and Energizer Holdings

0.52

Correlation Coefficient

Innospec  Energizer Holdings

Very weak diversification

The 3 months correlation between Innospec and Energizer is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and Energizer Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energizer Holdings and Innospec 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 Innospec are associated (or correlated) with Energizer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energizer Holdings has no effect on the direction of Innospec i.e., Innospec and Energizer Holdings go up and down completely randomly.

Pair Corralation between Innospec and Energizer Holdings

Given the investment horizon of 90 days Innospec is expected to generate 85.44 times less return on investment than Energizer Holdings. In addition to that, Innospec is 1.25 times more volatile than Energizer Holdings. It trades about 0.0 of its total potential returns per unit of risk. Energizer Holdings is currently generating about 0.19 per unit of volatility. If you would invest  2,936  in Energizer Holdings on September 25, 2024 and sell it today you would earn a total of  598.00  from holding Energizer Holdings or generate 20.37% return on investment over 90 days.

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

Innospec  vs.  Energizer Holdings

Innospec

Risk-Adjusted Performance

0 of 100

Very Weak

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

Energizer Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Energizer Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Energizer Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innospec and Energizer Holdings

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

The idea behind Innospec and Energizer Holdings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.