Correlation Between Insteel Industries and INNELEC MULTIMMINHEO153

Can any of the company-specific risk be diversified away by investing in both Insteel Industries and INNELEC MULTIMMINHEO153 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 INNELEC MULTIMMINHEO153 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Insteel Industries and INNELEC MULTIMMINHEO153, you can compare the effects of market volatilities on Insteel Industries and INNELEC MULTIMMINHEO153 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 INNELEC MULTIMMINHEO153. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insteel Industries and INNELEC MULTIMMINHEO153.

Diversification Opportunities for Insteel Industries and INNELEC MULTIMMINHEO153

0.2

Correlation Coefficient

Insteel Industries  INNELEC MULTIMMINHEO153

Modest diversification

The 3 months correlation between Insteel and INNELEC is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and INNELEC MULTIMMINHEO153 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INNELEC MULTIMMINHEO153 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 INNELEC MULTIMMINHEO153. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INNELEC MULTIMMINHEO153 has no effect on the direction of Insteel Industries i.e., Insteel Industries and INNELEC MULTIMMINHEO153 go up and down completely randomly.

Pair Corralation between Insteel Industries and INNELEC MULTIMMINHEO153

Assuming the 90 days horizon Insteel Industries is expected to generate 1.4 times more return on investment than INNELEC MULTIMMINHEO153. However, Insteel Industries is 1.4 times more volatile than INNELEC MULTIMMINHEO153. It trades about -0.01 of its potential returns per unit of risk. INNELEC MULTIMMINHEO153 is currently generating about -0.09 per unit of risk. If you would invest  2,617  in Insteel Industries on December 30, 2024 and sell it today you would lose (77.00) from holding Insteel Industries or give up 2.94% of portfolio value over 90 days.

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

Insteel Industries  vs.  INNELEC MULTIMMINHEO153

Insteel Industries

Risk-Adjusted Performance

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.

INNELEC MULTIMMINHEO153

Risk-Adjusted Performance

Very Weak

Over the last 90 days INNELEC MULTIMMINHEO153 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Insteel Industries and INNELEC MULTIMMINHEO153

The main advantage of trading using opposite Insteel Industries and INNELEC MULTIMMINHEO153 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries position performs unexpectedly, INNELEC MULTIMMINHEO153 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 INNELEC MULTIMMINHEO153 will offset losses from the drop in INNELEC MULTIMMINHEO153's long position.

The idea behind Insteel Industries and INNELEC MULTIMMINHEO153 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.