Correlation Between Southland Holdings and Innovate Corp

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

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

Diversification Opportunities for Southland Holdings and Innovate Corp

-0.09

Correlation Coefficient

Southland Holdings  Innovate Corp

Good diversification

The 3 months correlation between Southland and Innovate is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Southland Holdings and Innovate Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovate Corp and Southland Holdings 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 Southland Holdings are associated (or correlated) with Innovate Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovate Corp has no effect on the direction of Southland Holdings i.e., Southland Holdings and Innovate Corp go up and down completely randomly.

Pair Corralation between Southland Holdings and Innovate Corp

Given the investment horizon of 90 days Southland Holdings is expected to generate 5.26 times less return on investment than Innovate Corp. But when comparing it to its historical volatility, Southland Holdings is 1.22 times less risky than Innovate Corp. It trades about 0.02 of its potential returns per unit of risk. Innovate Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  389.00  in Innovate Corp on September 23, 2024 and sell it today you would earn a total of  136.00  from holding Innovate Corp or generate 34.96% return on investment over 90 days.

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

Southland Holdings  vs.  Innovate Corp

Southland Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southland Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Southland Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Innovate Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovate Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Innovate Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southland Holdings and Innovate Corp

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

The idea behind Southland Holdings and Innovate Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.