Correlation Between Grupo Simec and Insteel Industries

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

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

Diversification Opportunities for Grupo Simec and Insteel Industries

-0.18

Correlation Coefficient

Grupo Simec  Insteel Industries

Good diversification

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

Pair Corralation between Grupo Simec and Insteel Industries

Considering the 90-day investment horizon Grupo Simec SAB is expected to generate 2.0 times more return on investment than Insteel Industries. However, Grupo Simec is 2.0 times more volatile than Insteel Industries. It trades about 0.03 of its potential returns per unit of risk. Insteel Industries is currently generating about -0.06 per unit of risk. If you would invest  2,538  in Grupo Simec SAB on December 1, 2024 and sell it today you would earn a total of  11.00  from holding Grupo Simec SAB or generate 0.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Grupo Simec SAB  vs.  Insteel Industries

Grupo Simec SAB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Simec SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Grupo Simec is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

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. 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 Grupo Simec and Insteel Industries

The main advantage of trading using opposite Grupo Simec and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Simec 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 Grupo Simec SAB 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.