Correlation Between Insteel Industries and SPECTRA

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

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

Diversification Opportunities for Insteel Industries and SPECTRA

0.18

Correlation Coefficient

Insteel Industries  SPECTRA

Average diversification

The 3 months correlation between Insteel and SPECTRA is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and SPECTRA ENERGY PARTNERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPECTRA ENERGY PARTNERS 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 SPECTRA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPECTRA ENERGY PARTNERS has no effect on the direction of Insteel Industries i.e., Insteel Industries and SPECTRA go up and down completely randomly.

Pair Corralation between Insteel Industries and SPECTRA

Given the investment horizon of 90 days Insteel Industries is expected to under-perform the SPECTRA. In addition to that, Insteel Industries is 2.23 times more volatile than SPECTRA ENERGY PARTNERS. It trades about -0.06 of its total potential returns per unit of risk. SPECTRA ENERGY PARTNERS is currently generating about -0.06 per unit of volatility. If you would invest  10,448  in SPECTRA ENERGY PARTNERS on September 21, 2024 and sell it today you would lose (301.00) from holding SPECTRA ENERGY PARTNERS or give up 2.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	74.6%
Values	Daily Returns

Insteel Industries  vs.  SPECTRA ENERGY PARTNERS

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.

SPECTRA ENERGY PARTNERS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Insteel Industries and SPECTRA

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

The idea behind Insteel Industries and SPECTRA ENERGY PARTNERS 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.