Correlation Between PT Steel and Insteel Industries

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

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

Diversification Opportunities for PT Steel and Insteel Industries

0.1

Correlation Coefficient

PT Steel  Insteel Industries

Average diversification

The 3 months correlation between S08 and Insteel is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding PT Steel Pipe and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and PT Steel 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 PT Steel Pipe 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 PT Steel i.e., PT Steel and Insteel Industries go up and down completely randomly.

Pair Corralation between PT Steel and Insteel Industries

Assuming the 90 days horizon PT Steel Pipe is expected to generate 1.77 times more return on investment than Insteel Industries. However, PT Steel is 1.77 times more volatile than Insteel Industries. It trades about 0.04 of its potential returns per unit of risk. Insteel Industries is currently generating about -0.07 per unit of risk. If you would invest  1.10  in PT Steel Pipe on December 19, 2024 and sell it today you would earn a total of  0.05  from holding PT Steel Pipe or generate 4.55% return on investment over 90 days.

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

PT Steel Pipe  vs.  Insteel Industries

PT Steel Pipe

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Steel Pipe are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Steel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Insteel Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insteel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PT Steel and Insteel Industries

The main advantage of trading using opposite PT Steel and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Steel 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 PT Steel Pipe 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.