Correlation Between Insteel Industries and PUBLIC

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

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

Diversification Opportunities for Insteel Industries and PUBLIC

-0.04

Correlation Coefficient

Insteel Industries  PUBLIC

Good diversification

The 3 months correlation between Insteel and PUBLIC is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and PUBLIC SVC O in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PUBLIC SVC O 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 PUBLIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PUBLIC SVC O has no effect on the direction of Insteel Industries i.e., Insteel Industries and PUBLIC go up and down completely randomly.

Pair Corralation between Insteel Industries and PUBLIC

Given the investment horizon of 90 days Insteel Industries is expected to under-perform the PUBLIC. In addition to that, Insteel Industries is 1.75 times more volatile than PUBLIC SVC O. It trades about -0.05 of its total potential returns per unit of risk. PUBLIC SVC O is currently generating about -0.07 per unit of volatility. If you would invest  9,890  in PUBLIC SVC O on September 14, 2024 and sell it today you would lose (317.00) from holding PUBLIC SVC O or give up 3.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	56.25%
Values	Daily Returns

Insteel Industries  vs.  PUBLIC SVC O

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.

PUBLIC SVC O

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PUBLIC SVC O has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PUBLIC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Insteel Industries and PUBLIC

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

The idea behind Insteel Industries and PUBLIC SVC O 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.