Correlation Between Ampco Pittsburgh and Insteel Industries

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

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

Diversification Opportunities for Ampco Pittsburgh and Insteel Industries

0.45

Correlation Coefficient

Ampco Pittsburgh  Insteel Industries

Very weak diversification

The 3 months correlation between Ampco and Insteel is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ampco Pittsburgh and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and Ampco Pittsburgh 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 Ampco Pittsburgh 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 Ampco Pittsburgh i.e., Ampco Pittsburgh and Insteel Industries go up and down completely randomly.

Pair Corralation between Ampco Pittsburgh and Insteel Industries

Allowing for the 90-day total investment horizon Ampco Pittsburgh is expected to generate 1.23 times less return on investment than Insteel Industries. In addition to that, Ampco Pittsburgh is 2.44 times more volatile than Insteel Industries. It trades about 0.01 of its total potential returns per unit of risk. Insteel Industries is currently generating about 0.02 per unit of volatility. If you would invest  2,900  in Insteel Industries on August 31, 2024 and sell it today you would earn a total of  131.00  from holding Insteel Industries or generate 4.52% return on investment over 90 days.

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

Ampco Pittsburgh  vs.  Insteel Industries

Ampco Pittsburgh

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ampco Pittsburgh are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ampco Pittsburgh reported 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 newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ampco Pittsburgh and Insteel Industries

The main advantage of trading using opposite Ampco Pittsburgh and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ampco Pittsburgh 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 Ampco Pittsburgh 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.