Correlation Between Insteel Industries and American Education

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

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

Diversification Opportunities for Insteel Industries and American Education

-0.63

Correlation Coefficient

Insteel Industries  American Education

Excellent diversification

The 3 months correlation between Insteel and American is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and American Education Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Education Center 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 American Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Education Center has no effect on the direction of Insteel Industries i.e., Insteel Industries and American Education go up and down completely randomly.

Pair Corralation between Insteel Industries and American Education

If you would invest  0.23  in American Education Center on September 12, 2024 and sell it today you would earn a total of  0.00  from holding American Education Center or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Insteel Industries  vs.  American Education Center

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 latest stock price disarray, may contribute to short-term losses for the investors.

American Education Center

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Education Center has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, American Education is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Insteel Industries and American Education

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

The idea behind Insteel Industries and American Education Center 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.