Correlation Between Insteel Industries and CosmoSteel Holdings
Can any of the company-specific risk be diversified away by investing in both Insteel Industries and CosmoSteel Holdings 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 CosmoSteel Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insteel Industries and CosmoSteel Holdings Limited, you can compare the effects of market volatilities on Insteel Industries and CosmoSteel Holdings 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 CosmoSteel Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insteel Industries and CosmoSteel Holdings.
Diversification Opportunities for Insteel Industries and CosmoSteel Holdings
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Insteel and CosmoSteel is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and CosmoSteel Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CosmoSteel Holdings 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 CosmoSteel Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CosmoSteel Holdings has no effect on the direction of Insteel Industries i.e., Insteel Industries and CosmoSteel Holdings go up and down completely randomly.
Pair Corralation between Insteel Industries and CosmoSteel Holdings
Assuming the 90 days horizon Insteel Industries is expected to generate 0.99 times more return on investment than CosmoSteel Holdings. However, Insteel Industries is 1.01 times less risky than CosmoSteel Holdings. It trades about 0.02 of its potential returns per unit of risk. CosmoSteel Holdings Limited is currently generating about -0.01 per unit of risk. If you would invest 2,766 in Insteel Industries on August 28, 2024 and sell it today you would earn a total of 94.00 from holding Insteel Industries or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insteel Industries vs. CosmoSteel Holdings Limited
Performance |
| Timeline |
| Insteel Industries |
| CosmoSteel Holdings |
Insteel Industries and CosmoSteel Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insteel Industries and CosmoSteel Holdings
The main advantage of trading using opposite Insteel Industries and CosmoSteel Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries position performs unexpectedly, CosmoSteel Holdings 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 CosmoSteel Holdings will offset losses from the drop in CosmoSteel Holdings' long position.The idea behind Insteel Industries and CosmoSteel Holdings Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| CosmoSteel Holdings vs. Superior Plus Corp | CosmoSteel Holdings vs. NMI Holdings | CosmoSteel Holdings vs. Origin Agritech | CosmoSteel Holdings vs. SIVERS SEMICONDUCTORS AB |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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