Correlation Between Insteel Industries and Arconic

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

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

Diversification Opportunities for Insteel Industries and Arconic

-0.52

Correlation Coefficient

Insteel Industries  Arconic

Excellent diversification

The 3 months correlation between Insteel and Arconic is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Arconic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arconic 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 Arconic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arconic has no effect on the direction of Insteel Industries i.e., Insteel Industries and Arconic go up and down completely randomly.

Pair Corralation between Insteel Industries and Arconic

If you would invest  2,982  in Arconic on August 30, 2024 and sell it today you would earn a total of  0.00  from holding Arconic or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Insteel Industries  vs.  Arconic

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 latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Arconic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arconic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Arconic is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Insteel Industries and Arconic

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

The idea behind Insteel Industries and Arconic 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.