Correlation Between Insteel Industries and Hollywood Bowl

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

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

Diversification Opportunities for Insteel Industries and Hollywood Bowl

0.04

Correlation Coefficient

Insteel Industries  Hollywood Bowl

Significant diversification

The 3 months correlation between Insteel and Hollywood is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Hollywood Bowl Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hollywood Bowl Group 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 Hollywood Bowl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hollywood Bowl Group has no effect on the direction of Insteel Industries i.e., Insteel Industries and Hollywood Bowl go up and down completely randomly.

Pair Corralation between Insteel Industries and Hollywood Bowl

Assuming the 90 days horizon Insteel Industries is expected to generate 2.91 times less return on investment than Hollywood Bowl. In addition to that, Insteel Industries is 1.16 times more volatile than Hollywood Bowl Group. It trades about 0.01 of its total potential returns per unit of risk. Hollywood Bowl Group is currently generating about 0.04 per unit of volatility. If you would invest  258.00  in Hollywood Bowl Group on October 4, 2024 and sell it today you would earn a total of  76.00  from holding Hollywood Bowl Group or generate 29.46% return on investment over 90 days.

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

Insteel Industries  vs.  Hollywood Bowl Group

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Hollywood Bowl Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hollywood Bowl Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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 Hollywood Bowl

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

The idea behind Insteel Industries and Hollywood Bowl Group 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..