Correlation Between Insteel Industries and Tenaris SA

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

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

Diversification Opportunities for Insteel Industries and Tenaris SA

0.12

Correlation Coefficient

Insteel Industries  Tenaris SA

Average diversification

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

Pair Corralation between Insteel Industries and Tenaris SA

Given the investment horizon of 90 days Insteel Industries is expected to under-perform the Tenaris SA. In addition to that, Insteel Industries is 1.28 times more volatile than Tenaris SA ADR. It trades about -0.01 of its total potential returns per unit of risk. Tenaris SA ADR is currently generating about 0.1 per unit of volatility. If you would invest  3,022  in Tenaris SA ADR on September 23, 2024 and sell it today you would earn a total of  697.00  from holding Tenaris SA ADR or generate 23.06% 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.  Tenaris SA ADR

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.

Tenaris SA ADR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Tenaris SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Insteel Industries and Tenaris SA

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

The idea behind Insteel Industries and Tenaris SA ADR 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.