Correlation Between Insteel Industries and Upbound

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

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

Diversification Opportunities for Insteel Industries and Upbound

0.7

Correlation Coefficient

Insteel Industries  Upbound

Poor diversification

The 3 months correlation between Insteel and Upbound is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Upbound Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Upbound Group 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 Upbound. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Upbound Group has no effect on the direction of Insteel Industries i.e., Insteel Industries and Upbound go up and down completely randomly.

Pair Corralation between Insteel Industries and Upbound

Given the investment horizon of 90 days Insteel Industries is expected to under-perform the Upbound. But the stock apears to be less risky and, when comparing its historical volatility, Insteel Industries is 1.02 times less risky than Upbound. The stock trades about -0.05 of its potential returns per unit of risk. The Upbound Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,162  in Upbound Group on October 22, 2024 and sell it today you would lose (208.00) from holding Upbound Group or give up 6.58% of portfolio value over 90 days.

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

Insteel Industries  vs.  Upbound Group

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 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.

Upbound Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Upbound Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental drivers, Upbound may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Insteel Industries and Upbound

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

The idea behind Insteel Industries and Upbound Group 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.