Correlation Between Innovate Corp and Junee Limited

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

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

Diversification Opportunities for Innovate Corp and Junee Limited

0.19

Correlation Coefficient

Innovate Corp  Junee Limited

Average diversification

The 3 months correlation between Innovate and Junee is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Innovate Corp and Junee Limited Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Junee Limited Ordinary and Innovate 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 Innovate Corp are associated (or correlated) with Junee Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Junee Limited Ordinary has no effect on the direction of Innovate Corp i.e., Innovate Corp and Junee Limited go up and down completely randomly.

Pair Corralation between Innovate Corp and Junee Limited

Given the investment horizon of 90 days Innovate Corp is expected to generate 1.62 times more return on investment than Junee Limited. However, Innovate Corp is 1.62 times more volatile than Junee Limited Ordinary. It trades about 0.13 of its potential returns per unit of risk. Junee Limited Ordinary is currently generating about -0.01 per unit of risk. If you would invest  382.00  in Innovate Corp on September 5, 2024 and sell it today you would earn a total of  208.00  from holding Innovate Corp or generate 54.45% return on investment over 90 days.

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

Innovate Corp  vs.  Junee Limited Ordinary

Innovate Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovate Corp are ranked lower than 10 (%) 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.

Junee Limited Ordinary

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Junee Limited Ordinary has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Junee Limited is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Innovate Corp and Junee Limited

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

The idea behind Innovate Corp and Junee Limited Ordinary 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.