Correlation Between Highlight Communications and Insteel Industries
Can any of the company-specific risk be diversified away by investing in both Highlight Communications 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 Highlight Communications and Insteel Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highlight Communications AG and Insteel Industries, you can compare the effects of market volatilities on Highlight Communications 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 Highlight Communications with a short position of Insteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and Insteel Industries.
Diversification Opportunities for Highlight Communications and Insteel Industries
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Highlight and Insteel is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and Highlight Communications 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 Highlight Communications AG 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 Highlight Communications i.e., Highlight Communications and Insteel Industries go up and down completely randomly.
Pair Corralation between Highlight Communications and Insteel Industries
Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 1.19 times more return on investment than Insteel Industries. However, Highlight Communications is 1.19 times more volatile than Insteel Industries. It trades about 0.33 of its potential returns per unit of risk. Insteel Industries is currently generating about 0.28 per unit of risk. If you would invest 99.00 in Highlight Communications AG on September 2, 2024 and sell it today you would earn a total of 22.00 from holding Highlight Communications AG or generate 22.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highlight Communications AG vs. Insteel Industries
Performance |
| Timeline |
| Highlight Communications |
| Insteel Industries |
Highlight Communications and Insteel Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highlight Communications and Insteel Industries
The main advantage of trading using opposite Highlight Communications and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Communications 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.| Highlight Communications vs. Netflix | Highlight Communications vs. Warner Music Group | Highlight Communications vs. Superior Plus Corp | Highlight Communications vs. NMI Holdings |
| Insteel Industries vs. SIVERS SEMICONDUCTORS AB | Insteel Industries vs. Darden Restaurants | Insteel Industries vs. Reliance Steel Aluminum | Insteel Industries vs. Q2M Managementberatung AG |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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