Correlation Between Nexstar Broadcasting and Insteel Industries

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

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

Diversification Opportunities for Nexstar Broadcasting and Insteel Industries

-0.18

Correlation Coefficient

Nexstar Broadcasting  Insteel Industries

Good diversification

The 3 months correlation between Nexstar and Insteel is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nexstar Broadcasting Group and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and Nexstar Broadcasting 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 Nexstar Broadcasting Group 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 Nexstar Broadcasting i.e., Nexstar Broadcasting and Insteel Industries go up and down completely randomly.

Pair Corralation between Nexstar Broadcasting and Insteel Industries

Given the investment horizon of 90 days Nexstar Broadcasting Group is expected to generate 0.88 times more return on investment than Insteel Industries. However, Nexstar Broadcasting Group is 1.13 times less risky than Insteel Industries. It trades about 0.12 of its potential returns per unit of risk. Insteel Industries is currently generating about 0.03 per unit of risk. If you would invest  15,519  in Nexstar Broadcasting Group on December 29, 2024 and sell it today you would earn a total of  2,430  from holding Nexstar Broadcasting Group or generate 15.66% return on investment over 90 days.

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

Nexstar Broadcasting Group  vs.  Insteel Industries

Nexstar Broadcasting

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nexstar Broadcasting Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nexstar Broadcasting unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 Nexstar Broadcasting and Insteel Industries

The main advantage of trading using opposite Nexstar Broadcasting and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexstar Broadcasting 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 Nexstar Broadcasting Group 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.