Correlation Between Insteel Industries and Aptiv PLC

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

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

Diversification Opportunities for Insteel Industries and Aptiv PLC

-0.48

Correlation Coefficient

Insteel Industries  Aptiv PLC

Very good diversification

The 3 months correlation between Insteel and Aptiv is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Aptiv PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptiv PLC 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 Aptiv PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptiv PLC has no effect on the direction of Insteel Industries i.e., Insteel Industries and Aptiv PLC go up and down completely randomly.

Pair Corralation between Insteel Industries and Aptiv PLC

Given the investment horizon of 90 days Insteel Industries is expected to generate 0.94 times more return on investment than Aptiv PLC. However, Insteel Industries is 1.07 times less risky than Aptiv PLC. It trades about 0.0 of its potential returns per unit of risk. Aptiv PLC is currently generating about -0.04 per unit of risk. If you would invest  3,071  in Insteel Industries on October 25, 2024 and sell it today you would lose (173.00) from holding Insteel Industries or give up 5.63% of portfolio value over 90 days.

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

Insteel Industries  vs.  Aptiv PLC

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

Aptiv PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aptiv PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Aptiv PLC is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Insteel Industries and Aptiv PLC

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

The idea behind Insteel Industries and Aptiv PLC 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.