Correlation Between Insteel Industries and Grupo Simec

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

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

Diversification Opportunities for Insteel Industries and Grupo Simec

-0.35

Correlation Coefficient

Insteel Industries  Grupo Simec

Very good diversification

The 3 months correlation between Insteel and Grupo is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Grupo Simec SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Simec SAB 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 Grupo Simec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Simec SAB has no effect on the direction of Insteel Industries i.e., Insteel Industries and Grupo Simec go up and down completely randomly.

Pair Corralation between Insteel Industries and Grupo Simec

Given the investment horizon of 90 days Insteel Industries is expected to generate 0.62 times more return on investment than Grupo Simec. However, Insteel Industries is 1.62 times less risky than Grupo Simec. It trades about 0.03 of its potential returns per unit of risk. Grupo Simec SAB is currently generating about 0.01 per unit of risk. If you would invest  2,677  in Insteel Industries on December 28, 2024 and sell it today you would earn a total of  82.00  from holding Insteel Industries or generate 3.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Insteel Industries  vs.  Grupo Simec SAB

Insteel Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Insteel Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Grupo Simec SAB

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Insteel Industries and Grupo Simec

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

The idea behind Insteel Industries and Grupo Simec SAB 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.