Correlation Between FOSTOURGRP and Insteel Industries

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

By analyzing existing cross correlation between FOSTOURGRP EO 0001 and Insteel Industries, you can compare the effects of market volatilities on FOSTOURGRP and Insteel Industries 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 FOSTOURGRP with a short position of Insteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of FOSTOURGRP and Insteel Industries.

Diversification Opportunities for FOSTOURGRP and Insteel Industries

-0.48

Correlation Coefficient

FOSTOURGRP  Insteel Industries

Very good diversification

The 3 months correlation between FOSTOURGRP and Insteel is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding FOSTOURGRP EO 0001 and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and FOSTOURGRP 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 FOSTOURGRP EO 0001 are associated (or correlated) with Insteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insteel Industries has no effect on the direction of FOSTOURGRP i.e., FOSTOURGRP and Insteel Industries go up and down completely randomly.

Pair Corralation between FOSTOURGRP and Insteel Industries

Assuming the 90 days horizon FOSTOURGRP EO 0001 is expected to generate 5.39 times more return on investment than Insteel Industries. However, FOSTOURGRP is 5.39 times more volatile than Insteel Industries. It trades about 0.15 of its potential returns per unit of risk. Insteel Industries is currently generating about 0.05 per unit of risk. If you would invest  42.00  in FOSTOURGRP EO 0001 on October 26, 2024 and sell it today you would earn a total of  47.00  from holding FOSTOURGRP EO 0001 or generate 111.9% return on investment over 90 days.

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

FOSTOURGRP EO 0001  vs.  Insteel Industries

FOSTOURGRP EO 0001

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FOSTOURGRP EO 0001 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, FOSTOURGRP reported solid returns over the last few months and may actually be approaching a breakup point.

Insteel Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Insteel Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Insteel Industries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with FOSTOURGRP and Insteel Industries

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

The idea behind FOSTOURGRP EO 0001 and Insteel Industries 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.