Correlation Between Insteel Industries and Hurco Companies

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

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

Diversification Opportunities for Insteel Industries and Hurco Companies

0.12

Correlation Coefficient

Insteel Industries  Hurco Companies

Average diversification

The 3 months correlation between Insteel and Hurco is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Hurco Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hurco Companies 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 Hurco Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hurco Companies has no effect on the direction of Insteel Industries i.e., Insteel Industries and Hurco Companies go up and down completely randomly.

Pair Corralation between Insteel Industries and Hurco Companies

Given the investment horizon of 90 days Insteel Industries is expected to generate 0.94 times more return on investment than Hurco Companies. However, Insteel Industries is 1.06 times less risky than Hurco Companies. It trades about 0.01 of its potential returns per unit of risk. Hurco Companies is currently generating about -0.01 per unit of risk. If you would invest  2,775  in Insteel Industries on September 26, 2024 and sell it today you would earn a total of  21.00  from holding Insteel Industries or generate 0.76% return on investment over 90 days.

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

Insteel Industries  vs.  Hurco Companies

Insteel Industries

Risk-Adjusted Performance

0 of 100

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 latest unsteady performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Hurco Companies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hurco Companies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Hurco Companies is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Insteel Industries and Hurco Companies

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

The idea behind Insteel Industries and Hurco Companies 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.