Correlation Between Insteel Industries and Astral Foods

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Can any of the company-specific risk be diversified away by investing in both Insteel Industries and Astral Foods 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 Astral Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insteel Industries and Astral Foods Limited, you can compare the effects of market volatilities on Insteel Industries and Astral Foods 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 Astral Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insteel Industries and Astral Foods.

Diversification Opportunities for Insteel Industries and Astral Foods

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Insteel and Astral is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Astral Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astral Foods Limited 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 Astral Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astral Foods Limited has no effect on the direction of Insteel Industries i.e., Insteel Industries and Astral Foods go up and down completely randomly.

Pair Corralation between Insteel Industries and Astral Foods

Assuming the 90 days horizon Insteel Industries is expected to under-perform the Astral Foods. But the stock apears to be less risky and, when comparing its historical volatility, Insteel Industries is 1.28 times less risky than Astral Foods. The stock trades about -0.05 of its potential returns per unit of risk. The Astral Foods Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  905.00  in Astral Foods Limited on September 22, 2024 and sell it today you would earn a total of  50.00  from holding Astral Foods Limited or generate 5.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Insteel Industries  vs.  Astral Foods Limited

 Performance 
       Timeline  
Insteel Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.
Astral Foods Limited 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Astral Foods Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Astral Foods is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Insteel Industries and Astral Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Insteel Industries and Astral Foods

The main advantage of trading using opposite Insteel Industries and Astral Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries position performs unexpectedly, Astral Foods 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 Astral Foods will offset losses from the drop in Astral Foods' long position.
The idea behind Insteel Industries and Astral Foods Limited 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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