Correlation Between Insteel Industries and Mingteng International

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

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

Diversification Opportunities for Insteel Industries and Mingteng International

-0.13

Correlation Coefficient

Insteel Industries  Mingteng International

Good diversification

The 3 months correlation between Insteel and Mingteng is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Mingteng International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mingteng International 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 Mingteng International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mingteng International has no effect on the direction of Insteel Industries i.e., Insteel Industries and Mingteng International go up and down completely randomly.

Pair Corralation between Insteel Industries and Mingteng International

Given the investment horizon of 90 days Insteel Industries is expected to generate 14.31 times less return on investment than Mingteng International. But when comparing it to its historical volatility, Insteel Industries is 3.46 times less risky than Mingteng International. It trades about 0.01 of its potential returns per unit of risk. Mingteng International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  350.00  in Mingteng International on December 1, 2024 and sell it today you would earn a total of  175.00  from holding Mingteng International or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	43.93%
Values	Daily Returns

Insteel Industries  vs.  Mingteng International

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.

Mingteng International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mingteng International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Mingteng International is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Insteel Industries and Mingteng International

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

The idea behind Insteel Industries and Mingteng International 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.