Correlation Between Vodka Brands and Insteel Industries

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

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

Diversification Opportunities for Vodka Brands and Insteel Industries

0.22

Correlation Coefficient

Vodka Brands  Insteel Industries

Modest diversification

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

Pair Corralation between Vodka Brands and Insteel Industries

Given the investment horizon of 90 days Vodka Brands Corp is expected to generate 3.32 times more return on investment than Insteel Industries. However, Vodka Brands is 3.32 times more volatile than Insteel Industries. It trades about 0.22 of its potential returns per unit of risk. Insteel Industries is currently generating about -0.83 per unit of risk. If you would invest  107.00  in Vodka Brands Corp on October 15, 2024 and sell it today you would earn a total of  23.00  from holding Vodka Brands Corp or generate 21.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

Vodka Brands Corp  vs.  Insteel Industries

Vodka Brands Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vodka Brands Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking signals, Vodka Brands sustained 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 unfluctuating performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Vodka Brands and Insteel Industries

The main advantage of trading using opposite Vodka Brands and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodka Brands 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 Vodka Brands Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.