Correlation Between Ingevity Corp and General Environmental

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

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

Diversification Opportunities for Ingevity Corp and General Environmental

0.34

Correlation Coefficient

Ingevity Corp  General Environmental

Weak diversification

The 3 months correlation between Ingevity and General is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ingevity Corp and General Environmental Manageme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Environmental and Ingevity Corp 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 Ingevity Corp are associated (or correlated) with General Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Environmental has no effect on the direction of Ingevity Corp i.e., Ingevity Corp and General Environmental go up and down completely randomly.

Pair Corralation between Ingevity Corp and General Environmental

Given the investment horizon of 90 days Ingevity Corp is expected to generate 0.81 times more return on investment than General Environmental. However, Ingevity Corp is 1.24 times less risky than General Environmental. It trades about 0.1 of its potential returns per unit of risk. General Environmental Management is currently generating about -0.03 per unit of risk. If you would invest  3,771  in Ingevity Corp on September 14, 2024 and sell it today you would earn a total of  934.00  from holding Ingevity Corp or generate 24.77% return on investment over 90 days.

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

Ingevity Corp  vs.  General Environmental Manageme

Ingevity Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ingevity Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Ingevity Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

General Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Environmental Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Ingevity Corp and General Environmental

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

The idea behind Ingevity Corp and General Environmental Management 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.