Correlation Between Innovate Corp and Southland Holdings

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

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

Diversification Opportunities for Innovate Corp and Southland Holdings

-0.09

Correlation Coefficient

Innovate Corp  Southland Holdings

Good diversification

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

Pair Corralation between Innovate Corp and Southland Holdings

Given the investment horizon of 90 days Innovate Corp is expected to generate 1.22 times more return on investment than Southland Holdings. However, Innovate Corp is 1.22 times more volatile than Southland Holdings. It trades about 0.1 of its potential returns per unit of risk. Southland Holdings is currently generating about 0.02 per unit of risk. 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

Innovate Corp  vs.  Southland Holdings

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.

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 weak basic indicators, Southland Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Innovate Corp and Southland Holdings

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

The idea behind Innovate Corp and Southland Holdings 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.