Correlation Between Alpha One and Insteel Industries

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

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

Diversification Opportunities for Alpha One and Insteel Industries

-0.07

Correlation Coefficient

Alpha One  Insteel Industries

Good diversification

The 3 months correlation between Alpha and Insteel is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Alpha One and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and Alpha One 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 Alpha One 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 Alpha One i.e., Alpha One and Insteel Industries go up and down completely randomly.

Pair Corralation between Alpha One and Insteel Industries

If you would invest  2,677  in Insteel Industries on December 28, 2024 and sell it today you would lose (43.00) from holding Insteel Industries or give up 1.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Alpha One  vs.  Insteel Industries

Alpha One

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Alpha One is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Insteel Industries

Risk-Adjusted Performance

Weak

Over the last 90 days Insteel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Insteel Industries is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alpha One and Insteel Industries

The main advantage of trading using opposite Alpha One and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha One 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 Alpha One 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.