Correlation Between Insteel Industries and CIFI Holdings

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

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

Diversification Opportunities for Insteel Industries and CIFI Holdings

-0.2

Correlation Coefficient

Insteel Industries  CIFI Holdings

Good diversification

The 3 months correlation between Insteel and CIFI is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and CIFI Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIFI Holdings and Insteel Industries 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 Insteel Industries are associated (or correlated) with CIFI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIFI Holdings has no effect on the direction of Insteel Industries i.e., Insteel Industries and CIFI Holdings go up and down completely randomly.

Pair Corralation between Insteel Industries and CIFI Holdings

Assuming the 90 days horizon Insteel Industries is expected to generate 37.14 times less return on investment than CIFI Holdings. But when comparing it to its historical volatility, Insteel Industries is 5.14 times less risky than CIFI Holdings. It trades about 0.01 of its potential returns per unit of risk. CIFI Holdings Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3.30  in CIFI Holdings Co on September 27, 2024 and sell it today you would lose (0.15) from holding CIFI Holdings Co or give up 4.55% of portfolio value over 90 days.

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

Insteel Industries  vs.  CIFI Holdings Co

Insteel Industries

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Insteel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

CIFI Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CIFI Holdings Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CIFI Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Insteel Industries and CIFI Holdings

The main advantage of trading using opposite Insteel Industries and CIFI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries position performs unexpectedly, CIFI Holdings 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 CIFI Holdings will offset losses from the drop in CIFI Holdings' long position.

The idea behind Insteel Industries and CIFI Holdings Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.