Correlation Between Insteel Industries and WesBanco

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

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

Diversification Opportunities for Insteel Industries and WesBanco

0.05

Correlation Coefficient

Insteel Industries  WesBanco

Significant diversification

The 3 months correlation between Insteel and WesBanco is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and WesBanco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WesBanco 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 WesBanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WesBanco has no effect on the direction of Insteel Industries i.e., Insteel Industries and WesBanco go up and down completely randomly.

Pair Corralation between Insteel Industries and WesBanco

Given the investment horizon of 90 days Insteel Industries is expected to under-perform the WesBanco. In addition to that, Insteel Industries is 7.38 times more volatile than WesBanco. It trades about -0.08 of its total potential returns per unit of risk. WesBanco is currently generating about 0.13 per unit of volatility. If you would invest  2,460  in WesBanco on September 30, 2024 and sell it today you would earn a total of  55.00  from holding WesBanco or generate 2.24% return on investment over 90 days.

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

Insteel Industries  vs.  WesBanco

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.

WesBanco

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WesBanco are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, WesBanco is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Insteel Industries and WesBanco

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

The idea behind Insteel Industries and WesBanco 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.