Correlation Between CompoSecure and Insteel Industries
Can any of the company-specific risk be diversified away by investing in both CompoSecure 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 CompoSecure and Insteel Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CompoSecure and Insteel Industries, you can compare the effects of market volatilities on CompoSecure 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 CompoSecure with a short position of Insteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of CompoSecure and Insteel Industries.
Diversification Opportunities for CompoSecure and Insteel Industries
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between CompoSecure and Insteel is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding CompoSecure and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and CompoSecure 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 CompoSecure 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 CompoSecure i.e., CompoSecure and Insteel Industries go up and down completely randomly.
Pair Corralation between CompoSecure and Insteel Industries
Given the investment horizon of 90 days CompoSecure is expected to generate 2.41 times less return on investment than Insteel Industries. In addition to that, CompoSecure is 1.42 times more volatile than Insteel Industries. It trades about 0.06 of its total potential returns per unit of risk. Insteel Industries is currently generating about 0.2 per unit of volatility. If you would invest 2,776 in Insteel Industries on August 27, 2024 and sell it today you would earn a total of 271.00 from holding Insteel Industries or generate 9.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CompoSecure vs. Insteel Industries
Performance |
| Timeline |
| CompoSecure |
| Insteel Industries |
CompoSecure and Insteel Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CompoSecure and Insteel Industries
The main advantage of trading using opposite CompoSecure and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CompoSecure 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.| CompoSecure vs. Dave Warrants | CompoSecure vs. Evolv Technologies Holdings | CompoSecure vs. Aquagold International | CompoSecure vs. Morningstar Unconstrained Allocation |
| Insteel Industries vs. Haynes International | Insteel Industries vs. Mayville Engineering Co | Insteel Industries vs. Gulf Island Fabrication | Insteel Industries vs. ESAB Corp |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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