Correlation Between Innovate Corp and Lancer Orthodontics

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

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

Diversification Opportunities for Innovate Corp and Lancer Orthodontics

-0.33

Correlation Coefficient

Innovate Corp  Lancer Orthodontics

Very good diversification

The 3 months correlation between Innovate and Lancer is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Innovate Corp and Lancer Orthodontics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancer Orthodontics 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 Lancer Orthodontics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancer Orthodontics has no effect on the direction of Innovate Corp i.e., Innovate Corp and Lancer Orthodontics go up and down completely randomly.

Pair Corralation between Innovate Corp and Lancer Orthodontics

Given the investment horizon of 90 days Innovate Corp is expected to generate 0.87 times more return on investment than Lancer Orthodontics. However, Innovate Corp is 1.15 times less risky than Lancer Orthodontics. It trades about 0.09 of its potential returns per unit of risk. Lancer Orthodontics is currently generating about -0.12 per unit of risk. If you would invest  397.00  in Innovate Corp on September 24, 2024 and sell it today you would earn a total of  128.00  from holding Innovate Corp or generate 32.24% return on investment over 90 days.

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

Innovate Corp  vs.  Lancer Orthodontics

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.

Lancer Orthodontics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lancer Orthodontics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Innovate Corp and Lancer Orthodontics

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

The idea behind Innovate Corp and Lancer Orthodontics 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.