Correlation Between Weyco and Insteel Industries

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

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

Diversification Opportunities for Weyco and Insteel Industries

0.13

Correlation Coefficient

Weyco  Insteel Industries

Average diversification

The 3 months correlation between Weyco and Insteel is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Weyco Group and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and Weyco 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 Weyco Group 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 Weyco i.e., Weyco and Insteel Industries go up and down completely randomly.

Pair Corralation between Weyco and Insteel Industries

Given the investment horizon of 90 days Weyco Group is expected to generate 1.38 times more return on investment than Insteel Industries. However, Weyco is 1.38 times more volatile than Insteel Industries. It trades about 0.12 of its potential returns per unit of risk. Insteel Industries is currently generating about -0.05 per unit of risk. If you would invest  3,528  in Weyco Group on September 21, 2024 and sell it today you would earn a total of  199.00  from holding Weyco Group or generate 5.64% return on investment over 90 days.

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

Weyco Group  vs.  Insteel Industries

Weyco Group

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Weyco Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Weyco unveiled 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 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 Weyco and Insteel Industries

The main advantage of trading using opposite Weyco and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weyco 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 Weyco Group 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.