Correlation Between Insteel Industries and Materialise

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

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

Diversification Opportunities for Insteel Industries and Materialise

0.5

Correlation Coefficient

Insteel Industries  Materialise

Very weak diversification

The 3 months correlation between Insteel and Materialise is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Materialise NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materialise NV and Insteel Industries 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 Insteel Industries are associated (or correlated) with Materialise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materialise NV has no effect on the direction of Insteel Industries i.e., Insteel Industries and Materialise go up and down completely randomly.

Pair Corralation between Insteel Industries and Materialise

Assuming the 90 days horizon Insteel Industries is expected to under-perform the Materialise. But the stock apears to be less risky and, when comparing its historical volatility, Insteel Industries is 2.84 times less risky than Materialise. The stock trades about -0.13 of its potential returns per unit of risk. The Materialise NV is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  700.00  in Materialise NV on September 23, 2024 and sell it today you would earn a total of  25.00  from holding Materialise NV or generate 3.57% return on investment over 90 days.

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

Insteel Industries  vs.  Materialise NV

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. Despite nearly stable basic indicators, Insteel Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Materialise NV

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Insteel Industries and Materialise

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

The idea behind Insteel Industries and Materialise NV 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.