Correlation Between Insteel Industries and SCOTT TECHNOLOGY

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

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

Diversification Opportunities for Insteel Industries and SCOTT TECHNOLOGY

0.42

Correlation Coefficient

Insteel Industries  SCOTT TECHNOLOGY

Very weak diversification

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

Pair Corralation between Insteel Industries and SCOTT TECHNOLOGY

Assuming the 90 days horizon Insteel Industries is expected to under-perform the SCOTT TECHNOLOGY. But the stock apears to be less risky and, when comparing its historical volatility, Insteel Industries is 1.43 times less risky than SCOTT TECHNOLOGY. The stock trades about -0.03 of its potential returns per unit of risk. The SCOTT TECHNOLOGY is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  119.00  in SCOTT TECHNOLOGY on August 31, 2024 and sell it today you would earn a total of  16.00  from holding SCOTT TECHNOLOGY or generate 13.45% return on investment over 90 days.

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

Insteel Industries  vs.  SCOTT TECHNOLOGY

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

SCOTT TECHNOLOGY

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SCOTT TECHNOLOGY are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, SCOTT TECHNOLOGY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Insteel Industries and SCOTT TECHNOLOGY

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

The idea behind Insteel Industries and SCOTT TECHNOLOGY 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.