Correlation Between Insteel Industries and BASF SE
Can any of the company-specific risk be diversified away by investing in both Insteel Industries and BASF SE 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 BASF SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insteel Industries and BASF SE, you can compare the effects of market volatilities on Insteel Industries and BASF SE 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 BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insteel Industries and BASF SE.
Diversification Opportunities for Insteel Industries and BASF SE
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Insteel and BASF is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE 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 BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE has no effect on the direction of Insteel Industries i.e., Insteel Industries and BASF SE go up and down completely randomly.
Pair Corralation between Insteel Industries and BASF SE
Assuming the 90 days horizon Insteel Industries is expected to generate 0.94 times more return on investment than BASF SE. However, Insteel Industries is 1.06 times less risky than BASF SE. It trades about 0.03 of its potential returns per unit of risk. BASF SE is currently generating about 0.02 per unit of risk. If you would invest 2,209 in Insteel Industries on September 5, 2024 and sell it today you would earn a total of 571.00 from holding Insteel Industries or generate 25.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Insteel Industries vs. BASF SE
Performance |
| Timeline |
| Insteel Industries |
| BASF SE |
Insteel Industries and BASF SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insteel Industries and BASF SE
The main advantage of trading using opposite Insteel Industries and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries position performs unexpectedly, BASF SE 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 BASF SE will offset losses from the drop in BASF SE's long position.| Insteel Industries vs. thyssenkrupp AG | Insteel Industries vs. Superior Plus Corp | Insteel Industries vs. NMI Holdings | Insteel Industries vs. Origin Agritech |
| BASF SE vs. Goodyear Tire Rubber | BASF SE vs. Compagnie Plastic Omnium | BASF SE vs. Hyster Yale Materials Handling | BASF SE vs. Suntory Beverage Food |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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