Correlation Between Insteel Industries and Mitsubishi Electric

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

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

Diversification Opportunities for Insteel Industries and Mitsubishi Electric

0.28

Correlation Coefficient

Insteel Industries  Mitsubishi Electric

Modest diversification

The 3 months correlation between Insteel and Mitsubishi is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Mitsubishi Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Electric 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 Mitsubishi Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Electric has no effect on the direction of Insteel Industries i.e., Insteel Industries and Mitsubishi Electric go up and down completely randomly.

Pair Corralation between Insteel Industries and Mitsubishi Electric

Assuming the 90 days horizon Insteel Industries is expected to generate 1.89 times less return on investment than Mitsubishi Electric. In addition to that, Insteel Industries is 1.09 times more volatile than Mitsubishi Electric. It trades about 0.04 of its total potential returns per unit of risk. Mitsubishi Electric is currently generating about 0.08 per unit of volatility. If you would invest  1,455  in Mitsubishi Electric on September 13, 2024 and sell it today you would earn a total of  156.00  from holding Mitsubishi Electric or generate 10.72% return on investment over 90 days.

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

Insteel Industries  vs.  Mitsubishi Electric

Insteel Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Insteel Industries are ranked lower than 3 (%) 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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Mitsubishi Electric

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Electric are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Mitsubishi Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Insteel Industries and Mitsubishi Electric

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

The idea behind Insteel Industries and Mitsubishi Electric 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 Transaction History module to view history of all your transactions and understand their impact on performance.