Correlation Between Super League and Insteel Industries

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

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

Diversification Opportunities for Super League and Insteel Industries

-0.4

Correlation Coefficient

Super League  Insteel Industries

Very good diversification

The 3 months correlation between Super and Insteel is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Super League Enterprise and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and Super League 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 Super League Enterprise 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 Super League i.e., Super League and Insteel Industries go up and down completely randomly.

Pair Corralation between Super League and Insteel Industries

Considering the 90-day investment horizon Super League Enterprise is expected to generate 3.25 times more return on investment than Insteel Industries. However, Super League is 3.25 times more volatile than Insteel Industries. It trades about 0.05 of its potential returns per unit of risk. Insteel Industries is currently generating about -0.26 per unit of risk. If you would invest  64.00  in Super League Enterprise on October 1, 2024 and sell it today you would earn a total of  1.90  from holding Super League Enterprise or generate 2.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Super League Enterprise  vs.  Insteel Industries

Super League Enterprise

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Super League Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Super League is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 unfluctuating 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 Super League and Insteel Industries

The main advantage of trading using opposite Super League and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Super League 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 Super League Enterprise 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.