Correlation Between Universal Technical and Insteel Industries

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

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

Diversification Opportunities for Universal Technical and Insteel Industries

0.22

Correlation Coefficient

Universal Technical  Insteel Industries

Modest diversification

The 3 months correlation between Universal and Insteel is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Universal Technical Institute and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and Universal Technical 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 Universal Technical Institute 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 Universal Technical i.e., Universal Technical and Insteel Industries go up and down completely randomly.

Pair Corralation between Universal Technical and Insteel Industries

Considering the 90-day investment horizon Universal Technical Institute is expected to generate 1.75 times more return on investment than Insteel Industries. However, Universal Technical is 1.75 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 -0.29 per unit of risk. If you would invest  2,594  in Universal Technical Institute on September 25, 2024 and sell it today you would earn a total of  35.00  from holding Universal Technical Institute or generate 1.35% return on investment over 90 days.

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

Universal Technical Institute  vs.  Insteel Industries

Universal Technical

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Technical Institute are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Universal Technical demonstrated 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 Universal Technical and Insteel Industries

The main advantage of trading using opposite Universal Technical and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Technical 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 Universal Technical Institute 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.