Correlation Between Insteel Industries and Paysafe

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

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

Diversification Opportunities for Insteel Industries and Paysafe

-0.11

Correlation Coefficient

Insteel Industries  Paysafe

Good diversification

The 3 months correlation between Insteel and Paysafe is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Paysafe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paysafe 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 Paysafe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paysafe has no effect on the direction of Insteel Industries i.e., Insteel Industries and Paysafe go up and down completely randomly.

Pair Corralation between Insteel Industries and Paysafe

Given the investment horizon of 90 days Insteel Industries is expected to generate 4.95 times less return on investment than Paysafe. But when comparing it to its historical volatility, Insteel Industries is 1.77 times less risky than Paysafe. It trades about 0.01 of its potential returns per unit of risk. Paysafe is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,674  in Paysafe on September 27, 2024 and sell it today you would earn a total of  40.00  from holding Paysafe or generate 2.39% return on investment over 90 days.

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

Insteel Industries  vs.  Paysafe

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.

Paysafe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paysafe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Insteel Industries and Paysafe

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

The idea behind Insteel Industries and Paysafe 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.