Correlation Between Perimeter Solutions and Innospec

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

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

Diversification Opportunities for Perimeter Solutions and Innospec

0.21

Correlation Coefficient

Perimeter Solutions  Innospec

Modest diversification

The 3 months correlation between Perimeter and Innospec is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Perimeter Solutions SA and Innospec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innospec and Perimeter Solutions 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 Perimeter Solutions SA are associated (or correlated) with Innospec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innospec has no effect on the direction of Perimeter Solutions i.e., Perimeter Solutions and Innospec go up and down completely randomly.

Pair Corralation between Perimeter Solutions and Innospec

Considering the 90-day investment horizon Perimeter Solutions SA is expected to generate 1.23 times more return on investment than Innospec. However, Perimeter Solutions is 1.23 times more volatile than Innospec. It trades about 0.06 of its potential returns per unit of risk. Innospec is currently generating about 0.03 per unit of risk. If you would invest  1,171  in Perimeter Solutions SA on August 30, 2024 and sell it today you would earn a total of  89.00  from holding Perimeter Solutions SA or generate 7.6% return on investment over 90 days.

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

Perimeter Solutions SA  vs.  Innospec

Perimeter Solutions

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Perimeter Solutions SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Perimeter Solutions may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Innospec

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Innospec are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Innospec is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Perimeter Solutions and Innospec

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

The idea behind Perimeter Solutions SA and Innospec 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.

Check out your portfolio center.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.