Correlation Between Insteel Industries and Sellas Life

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

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

Diversification Opportunities for Insteel Industries and Sellas Life

0.29

Correlation Coefficient

Insteel Industries  Sellas Life

Modest diversification

The 3 months correlation between Insteel and Sellas is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Sellas Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sellas Life Sciences 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 Sellas Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sellas Life Sciences has no effect on the direction of Insteel Industries i.e., Insteel Industries and Sellas Life go up and down completely randomly.

Pair Corralation between Insteel Industries and Sellas Life

Given the investment horizon of 90 days Insteel Industries is expected to generate 0.69 times more return on investment than Sellas Life. However, Insteel Industries is 1.46 times less risky than Sellas Life. It trades about -0.04 of its potential returns per unit of risk. Sellas Life Sciences is currently generating about -0.1 per unit of risk. If you would invest  3,162  in Insteel Industries on September 13, 2024 and sell it today you would lose (217.00) from holding Insteel Industries or give up 6.86% 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.  Sellas Life Sciences

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

Sellas Life Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sellas Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Insteel Industries and Sellas Life

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

The idea behind Insteel Industries and Sellas Life Sciences 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.