Correlation Between British American and Insteel Industries
Can any of the company-specific risk be diversified away by investing in both British American and Insteel Industries 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 British American and Insteel Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Insteel Industries, you can compare the effects of market volatilities on British American and Insteel Industries 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 British American with a short position of Insteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Insteel Industries.
Diversification Opportunities for British American and Insteel Industries
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between British and Insteel is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and British American 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 British American Tobacco are associated (or correlated) with Insteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insteel Industries has no effect on the direction of British American i.e., British American and Insteel Industries go up and down completely randomly.
Pair Corralation between British American and Insteel Industries
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.47 times more return on investment than Insteel Industries. However, British American Tobacco is 2.14 times less risky than Insteel Industries. It trades about 0.2 of its potential returns per unit of risk. Insteel Industries is currently generating about -0.01 per unit of risk. If you would invest 2,746 in British American Tobacco on August 25, 2024 and sell it today you would earn a total of 834.00 from holding British American Tobacco or generate 30.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Insteel Industries
Performance |
| Timeline |
| British American Tobacco |
| Insteel Industries |
British American and Insteel Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Insteel Industries
The main advantage of trading using opposite British American and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Insteel Industries 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 Insteel Industries will offset losses from the drop in Insteel Industries' long position.| British American vs. Plastic Omnium | British American vs. United States Steel | British American vs. GFL ENVIRONM | British American vs. Boiron SA |
| Insteel Industries vs. Cleanaway Waste Management | Insteel Industries vs. Platinum Investment Management | Insteel Industries vs. Check Point Software | Insteel Industries vs. Constellation Software |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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