Correlation Between Insteel Industries and Keurig Dr

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

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

Diversification Opportunities for Insteel Industries and Keurig Dr

0.21

Correlation Coefficient

Insteel Industries  Keurig Dr

Modest diversification

The 3 months correlation between Insteel and Keurig is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Keurig Dr Pepper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keurig Dr Pepper 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 Keurig Dr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keurig Dr Pepper has no effect on the direction of Insteel Industries i.e., Insteel Industries and Keurig Dr go up and down completely randomly.

Pair Corralation between Insteel Industries and Keurig Dr

Given the investment horizon of 90 days Insteel Industries is expected to generate 1.67 times more return on investment than Keurig Dr. However, Insteel Industries is 1.67 times more volatile than Keurig Dr Pepper. It trades about -0.06 of its potential returns per unit of risk. Keurig Dr Pepper is currently generating about -0.19 per unit of risk. If you would invest  3,144  in Insteel Industries on September 21, 2024 and sell it today you would lose (272.00) from holding Insteel Industries or give up 8.65% of portfolio value over 90 days.

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

Insteel Industries  vs.  Keurig Dr Pepper

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 unsteady 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.

Keurig Dr Pepper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keurig Dr Pepper has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Insteel Industries and Keurig Dr

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

The idea behind Insteel Industries and Keurig Dr Pepper 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.