Correlation Between Q2 Holdings and Insteel Industries

Can any of the company-specific risk be diversified away by investing in both Q2 Holdings 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 Q2 Holdings and Insteel Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Q2 Holdings and Insteel Industries, you can compare the effects of market volatilities on Q2 Holdings 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 Q2 Holdings with a short position of Insteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Q2 Holdings and Insteel Industries.

Diversification Opportunities for Q2 Holdings and Insteel Industries

-0.24

Correlation Coefficient

Q2 Holdings  Insteel Industries

Very good diversification

The 3 months correlation between QTWO and Insteel is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Q2 Holdings and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and Q2 Holdings 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 Q2 Holdings 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 Q2 Holdings i.e., Q2 Holdings and Insteel Industries go up and down completely randomly.

Pair Corralation between Q2 Holdings and Insteel Industries

Given the investment horizon of 90 days Q2 Holdings is expected to generate 1.32 times more return on investment than Insteel Industries. However, Q2 Holdings is 1.32 times more volatile than Insteel Industries. It trades about 0.11 of its potential returns per unit of risk. Insteel Industries is currently generating about 0.02 per unit of risk. If you would invest  2,774  in Q2 Holdings on September 4, 2024 and sell it today you would earn a total of  8,145  from holding Q2 Holdings or generate 293.62% return on investment over 90 days.

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

Q2 Holdings  vs.  Insteel Industries

Q2 Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Q2 Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Q2 Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Q2 Holdings and Insteel Industries

The main advantage of trading using opposite Q2 Holdings and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Q2 Holdings 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 Q2 Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.