Correlation Between Barrick Gold and Insteel Industries

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

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

Diversification Opportunities for Barrick Gold and Insteel Industries

-0.06

Correlation Coefficient

Barrick Gold  Insteel Industries

Good diversification

The 3 months correlation between Barrick and Insteel is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Barrick Gold Corp and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and Barrick Gold 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 Barrick Gold 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 Barrick Gold i.e., Barrick Gold and Insteel Industries go up and down completely randomly.

Pair Corralation between Barrick Gold and Insteel Industries

Given the investment horizon of 90 days Barrick Gold Corp is expected to under-perform the Insteel Industries. But the stock apears to be less risky and, when comparing its historical volatility, Barrick Gold Corp is 1.19 times less risky than Insteel Industries. The stock trades about -0.16 of its potential returns per unit of risk. The Insteel Industries is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3,201  in Insteel Industries on September 15, 2024 and sell it today you would lose (240.00) from holding Insteel Industries or give up 7.5% of portfolio value over 90 days.

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

Barrick Gold Corp  vs.  Insteel Industries

Barrick Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barrick Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 Barrick Gold and Insteel Industries

The main advantage of trading using opposite Barrick Gold and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barrick Gold 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 Barrick Gold 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.