Correlation Between AerSale Corp and Insteel Industries

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

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

Diversification Opportunities for AerSale Corp and Insteel Industries

0.1

Correlation Coefficient

AerSale Corp  Insteel Industries

Average diversification

The 3 months correlation between AerSale and Insteel is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding AerSale Corp and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and AerSale 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 AerSale Corp 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 AerSale Corp i.e., AerSale Corp and Insteel Industries go up and down completely randomly.

Pair Corralation between AerSale Corp and Insteel Industries

Given the investment horizon of 90 days AerSale Corp is expected to generate 1.25 times more return on investment than Insteel Industries. However, AerSale Corp is 1.25 times more volatile than Insteel Industries. It trades about 0.14 of its potential returns per unit of risk. Insteel Industries is currently generating about 0.02 per unit of risk. If you would invest  553.00  in AerSale Corp on September 26, 2024 and sell it today you would earn a total of  77.00  from holding AerSale Corp or generate 13.92% return on investment over 90 days.

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

AerSale Corp  vs.  Insteel Industries

AerSale Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AerSale Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, AerSale Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Insteel Industries

Risk-Adjusted Performance

0 of 100

Very 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 latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with AerSale Corp and Insteel Industries

The main advantage of trading using opposite AerSale Corp and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AerSale Corp 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 AerSale Corp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.