Correlation Between Safety Shot and Insteel Industries

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

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

Diversification Opportunities for Safety Shot and Insteel Industries

0.04

Correlation Coefficient

Safety Shot  Insteel Industries

Significant diversification

The 3 months correlation between Safety and Insteel is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Safety Shot and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and Safety Shot 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 Safety Shot 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 Safety Shot i.e., Safety Shot and Insteel Industries go up and down completely randomly.

Pair Corralation between Safety Shot and Insteel Industries

Given the investment horizon of 90 days Safety Shot is expected to generate 3.51 times more return on investment than Insteel Industries. However, Safety Shot is 3.51 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 0.01 per unit of risk. If you would invest  84.00  in Safety Shot on September 26, 2024 and sell it today you would lose (8.00) from holding Safety Shot or give up 9.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Safety Shot  vs.  Insteel Industries

Safety Shot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safety Shot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 latest unsteady performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Safety Shot and Insteel Industries

The main advantage of trading using opposite Safety Shot and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safety Shot 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 Safety Shot 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.