Correlation Between Insteel Industries and Walmart

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

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

Diversification Opportunities for Insteel Industries and Walmart

0.32

Correlation Coefficient

Insteel Industries  Walmart

Weak diversification

The 3 months correlation between Insteel and Walmart is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Insteel Industries i.e., Insteel Industries and Walmart go up and down completely randomly.

Pair Corralation between Insteel Industries and Walmart

Assuming the 90 days horizon Insteel Industries is expected to under-perform the Walmart. In addition to that, Insteel Industries is 1.42 times more volatile than Walmart. It trades about -0.03 of its total potential returns per unit of risk. Walmart is currently generating about 0.05 per unit of volatility. If you would invest  8,939  in Walmart on December 4, 2024 and sell it today you would earn a total of  315.00  from holding Walmart or generate 3.52% return on investment over 90 days.

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

Insteel Industries  vs.  Walmart

Insteel Industries

Risk-Adjusted Performance

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.

Walmart

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Walmart is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Insteel Industries and Walmart

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

The idea behind Insteel Industries and Walmart 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.