Correlation Between Insteel Industries and Perma Fix

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

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

Diversification Opportunities for Insteel Industries and Perma Fix

-0.2

Correlation Coefficient

Insteel Industries  Perma Fix

Good diversification

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

Pair Corralation between Insteel Industries and Perma Fix

Assuming the 90 days horizon Insteel Industries is expected to under-perform the Perma Fix. But the stock apears to be less risky and, when comparing its historical volatility, Insteel Industries is 2.0 times less risky than Perma Fix. The stock trades about -0.04 of its potential returns per unit of risk. The Perma Fix Environmental Services is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,100  in Perma Fix Environmental Services on October 4, 2024 and sell it today you would lose (60.00) from holding Perma Fix Environmental Services or give up 5.45% of portfolio value over 90 days.

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

Insteel Industries  vs.  Perma Fix Environmental Servic

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.

Perma Fix Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perma Fix Environmental Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Perma Fix is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Insteel Industries and Perma Fix

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

The idea behind Insteel Industries and Perma Fix Environmental Services 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.