Correlation Between Insteel Industries and United States

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

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

Diversification Opportunities for Insteel Industries and United States

0.34

Correlation Coefficient

Insteel Industries  United States

Weak diversification

The 3 months correlation between Insteel and United is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Insteel Industries i.e., Insteel Industries and United States go up and down completely randomly.

Pair Corralation between Insteel Industries and United States

Given the investment horizon of 90 days Insteel Industries is expected to generate 0.42 times more return on investment than United States. However, Insteel Industries is 2.4 times less risky than United States. It trades about -0.37 of its potential returns per unit of risk. United States Steel is currently generating about -0.26 per unit of risk. If you would invest  2,966  in Insteel Industries on October 5, 2024 and sell it today you would lose (363.00) from holding Insteel Industries or give up 12.24% of portfolio value over 90 days.

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

Insteel Industries  vs.  United States Steel

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 unfluctuating performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Insteel Industries and United States

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

The idea behind Insteel Industries and United States Steel 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.