Correlation Between DICKS Sporting and Insteel Industries

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

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

Diversification Opportunities for DICKS Sporting and Insteel Industries

0.36

Correlation Coefficient

DICKS Sporting  Insteel Industries

Weak diversification

The 3 months correlation between DICKS and Insteel is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding DICKS Sporting Goods and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and DICKS Sporting 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 DICKS Sporting Goods 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 DICKS Sporting i.e., DICKS Sporting and Insteel Industries go up and down completely randomly.

Pair Corralation between DICKS Sporting and Insteel Industries

Assuming the 90 days horizon DICKS Sporting Goods is expected to generate 1.06 times more return on investment than Insteel Industries. However, DICKS Sporting is 1.06 times more volatile than Insteel Industries. It trades about 0.07 of its potential returns per unit of risk. Insteel Industries is currently generating about 0.02 per unit of risk. If you would invest  18,539  in DICKS Sporting Goods on September 12, 2024 and sell it today you would earn a total of  1,816  from holding DICKS Sporting Goods or generate 9.8% return on investment over 90 days.

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

DICKS Sporting Goods  vs.  Insteel Industries

DICKS Sporting Goods

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DICKS Sporting Goods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DICKS Sporting may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Insteel Industries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Insteel Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Insteel Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DICKS Sporting and Insteel Industries

The main advantage of trading using opposite DICKS Sporting and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DICKS Sporting 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 DICKS Sporting Goods 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.