Correlation Between Delek Drilling and Insteel Industries

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

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

Diversification Opportunities for Delek Drilling and Insteel Industries

-0.01

Correlation Coefficient

Delek Drilling  Insteel Industries

Good diversification

The 3 months correlation between Delek and Insteel is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Delek Drilling and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and Delek Drilling 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 Delek Drilling 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 Delek Drilling i.e., Delek Drilling and Insteel Industries go up and down completely randomly.

Pair Corralation between Delek Drilling and Insteel Industries

Assuming the 90 days horizon Delek Drilling is expected to generate 1.14 times more return on investment than Insteel Industries. However, Delek Drilling is 1.14 times more volatile than Insteel Industries. It trades about 0.11 of its potential returns per unit of risk. Insteel Industries is currently generating about -0.04 per unit of risk. If you would invest  267.00  in Delek Drilling on September 16, 2024 and sell it today you would earn a total of  45.00  from holding Delek Drilling or generate 16.85% return on investment over 90 days.

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

Delek Drilling   vs.  Insteel Industries

Delek Drilling

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Delek Drilling reported 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 very healthy forward indicators, Insteel Industries is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Delek Drilling and Insteel Industries

The main advantage of trading using opposite Delek Drilling and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delek Drilling 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 Delek Drilling 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.