Correlation Between Insteel Industries and Alabama Aircraft

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

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

Diversification Opportunities for Insteel Industries and Alabama Aircraft

0.0

Correlation Coefficient

Insteel Industries  Alabama Aircraft

Pay attention - limited upside

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

Pair Corralation between Insteel Industries and Alabama Aircraft

If you would invest  2,623  in Insteel Industries on December 2, 2024 and sell it today you would earn a total of  191.00  from holding Insteel Industries or generate 7.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Insteel Industries  vs.  Alabama Aircraft Industries

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. In spite of very healthy forward indicators, Insteel Industries is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Alabama Aircraft Ind

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alabama Aircraft Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Alabama Aircraft is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Insteel Industries and Alabama Aircraft

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

The idea behind Insteel Industries and Alabama Aircraft 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.