Correlation Between Insteel Industries and Sandstorm Gold

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

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

Diversification Opportunities for Insteel Industries and Sandstorm Gold

-0.21

Correlation Coefficient

Insteel Industries  Sandstorm Gold

Very good diversification

The 3 months correlation between Insteel and Sandstorm is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Sandstorm Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandstorm Gold 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 Sandstorm Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandstorm Gold has no effect on the direction of Insteel Industries i.e., Insteel Industries and Sandstorm Gold go up and down completely randomly.

Pair Corralation between Insteel Industries and Sandstorm Gold

Given the investment horizon of 90 days Insteel Industries is expected to under-perform the Sandstorm Gold. But the stock apears to be less risky and, when comparing its historical volatility, Insteel Industries is 1.27 times less risky than Sandstorm Gold. The stock trades about -0.27 of its potential returns per unit of risk. The Sandstorm Gold Ltd is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  582.00  in Sandstorm Gold Ltd on September 24, 2024 and sell it today you would lose (43.00) from holding Sandstorm Gold Ltd or give up 7.39% of portfolio value over 90 days.

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

Insteel Industries  vs.  Sandstorm Gold Ltd

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.

Sandstorm Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandstorm Gold Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic 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 Sandstorm Gold

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

The idea behind Insteel Industries and Sandstorm Gold Ltd 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.