Correlation Between Insteel Industries and CHEMICAL INDUSTRIES

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

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

Diversification Opportunities for Insteel Industries and CHEMICAL INDUSTRIES

0.0

Correlation Coefficient

Insteel Industries  CHEMICAL INDUSTRIES

Pay attention - limited upside

The 3 months correlation between Insteel and CHEMICAL is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and CHEMICAL INDUSTRIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHEMICAL INDUSTRIES has no effect on the direction of Insteel Industries i.e., Insteel Industries and CHEMICAL INDUSTRIES go up and down completely randomly.

Pair Corralation between Insteel Industries and CHEMICAL INDUSTRIES

If you would invest  2,597  in Insteel Industries on October 25, 2024 and sell it today you would earn a total of  83.00  from holding Insteel Industries or generate 3.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Insteel Industries  vs.  CHEMICAL INDUSTRIES

Insteel Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Insteel Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Insteel Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CHEMICAL INDUSTRIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHEMICAL INDUSTRIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, CHEMICAL INDUSTRIES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Insteel Industries and CHEMICAL INDUSTRIES

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

The idea behind Insteel Industries and CHEMICAL INDUSTRIES 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.