Correlation Between Insteel Industries and KIMBERLY

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

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

Diversification Opportunities for Insteel Industries and KIMBERLY

-0.75

Correlation Coefficient

Insteel Industries  KIMBERLY

Pay attention - limited upside

The 3 months correlation between Insteel and KIMBERLY is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and KIMBERLY CLARK P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIMBERLY CLARK P 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 KIMBERLY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIMBERLY CLARK P has no effect on the direction of Insteel Industries i.e., Insteel Industries and KIMBERLY go up and down completely randomly.

Pair Corralation between Insteel Industries and KIMBERLY

Given the investment horizon of 90 days Insteel Industries is expected to generate 1.66 times more return on investment than KIMBERLY. However, Insteel Industries is 1.66 times more volatile than KIMBERLY CLARK P. It trades about -0.05 of its potential returns per unit of risk. KIMBERLY CLARK P is currently generating about -0.25 per unit of risk. If you would invest  3,274  in Insteel Industries on September 17, 2024 and sell it today you would lose (273.50) from holding Insteel Industries or give up 8.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	52.31%
Values	Daily Returns

Insteel Industries  vs.  KIMBERLY CLARK P

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.

KIMBERLY CLARK P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KIMBERLY CLARK P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for KIMBERLY CLARK P investors.

Pair Trading with Insteel Industries and KIMBERLY

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

The idea behind Insteel Industries and KIMBERLY CLARK P 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.