Correlation Between Mayville Engineering and Insteel Industries

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

By analyzing existing cross correlation between Mayville Engineering Co and Insteel Industries, you can compare the effects of market volatilities on Mayville Engineering and Insteel Industries 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 Mayville Engineering with a short position of Insteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mayville Engineering and Insteel Industries.

Diversification Opportunities for Mayville Engineering and Insteel Industries

0.32

Correlation Coefficient

Mayville Engineering  Insteel Industries

Weak diversification

The 3 months correlation between Mayville and Insteel is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Mayville Engineering Co and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and Mayville Engineering 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 Mayville Engineering Co are associated (or correlated) with Insteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insteel Industries has no effect on the direction of Mayville Engineering i.e., Mayville Engineering and Insteel Industries go up and down completely randomly.

Pair Corralation between Mayville Engineering and Insteel Industries

Considering the 90-day investment horizon Mayville Engineering Co is expected to under-perform the Insteel Industries. But the stock apears to be less risky and, when comparing its historical volatility, Mayville Engineering Co is 1.18 times less risky than Insteel Industries. The stock trades about -0.11 of its potential returns per unit of risk. The Insteel Industries is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,677  in Insteel Industries on December 29, 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Mayville Engineering Co  vs.  Insteel Industries

Mayville Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mayville Engineering Co 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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.

Pair Trading with Mayville Engineering and Insteel Industries

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

The idea behind Mayville Engineering Co and Insteel Industries 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.

Check out your portfolio center.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.