Correlation Between Insteel Industries and British American
Can any of the company-specific risk be diversified away by investing in both Insteel Industries and British American 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 British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insteel Industries and British American Tobacco, you can compare the effects of market volatilities on Insteel Industries and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insteel Industries and British American.
Diversification Opportunities for Insteel Industries and British American
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Insteel and British is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Insteel Industries i.e., Insteel Industries and British American go up and down completely randomly.
Pair Corralation between Insteel Industries and British American
Assuming the 90 days horizon Insteel Industries is expected to generate 12.77 times less return on investment than British American. In addition to that, Insteel Industries is 2.17 times more volatile than British American Tobacco. It trades about 0.01 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.2 per unit of volatility. If you would invest 2,721 in British American Tobacco on August 28, 2024 and sell it today you would earn a total of 835.00 from holding British American Tobacco or generate 30.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
Insteel Industries vs. British American Tobacco
Performance |
| Timeline |
| Insteel Industries |
| British American Tobacco |
Insteel Industries and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insteel Industries and British American
The main advantage of trading using opposite Insteel Industries and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Insteel Industries vs. Computershare Limited | Insteel Industries vs. Entravision Communications | Insteel Industries vs. Strategic Education | Insteel Industries vs. LG Display Co |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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