Correlation Between Insteel Industries and Alumina

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

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

Diversification Opportunities for Insteel Industries and Alumina

0.0

Correlation Coefficient

Insteel Industries  Alumina

Pay attention - limited upside

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

Pair Corralation between Insteel Industries and Alumina

If you would invest  2,777  in Insteel Industries on December 21, 2024 and sell it today you would lose (26.00) from holding Insteel Industries or give up 0.94% of portfolio value over 90 days.

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

Insteel Industries  vs.  Alumina Limited

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.

Alumina Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alumina Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Alumina 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 Alumina

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

The idea behind Insteel Industries and Alumina Limited 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.