Correlation Between Insteel Industries and Boyd Gaming

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

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

Diversification Opportunities for Insteel Industries and Boyd Gaming

0.42

Correlation Coefficient

Insteel Industries  Boyd Gaming

Very weak diversification

The 3 months correlation between Insteel and Boyd is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Boyd Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boyd Gaming 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 Boyd Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boyd Gaming has no effect on the direction of Insteel Industries i.e., Insteel Industries and Boyd Gaming go up and down completely randomly.

Pair Corralation between Insteel Industries and Boyd Gaming

Assuming the 90 days horizon Insteel Industries is expected to under-perform the Boyd Gaming. But the stock apears to be less risky and, when comparing its historical volatility, Insteel Industries is 1.56 times less risky than Boyd Gaming. The stock trades about -1.06 of its potential returns per unit of risk. The Boyd Gaming is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  7,083  in Boyd Gaming on October 14, 2024 and sell it today you would lose (183.00) from holding Boyd Gaming or give up 2.58% of portfolio value over 90 days.

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

Insteel Industries  vs.  Boyd Gaming

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 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.

Boyd Gaming

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boyd Gaming are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Boyd Gaming unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Insteel Industries and Boyd Gaming

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

The idea behind Insteel Industries and Boyd Gaming 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..