Correlation Between Insteel Industries and Metso Outotec

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Can any of the company-specific risk be diversified away by investing in both Insteel Industries and Metso Outotec 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 Metso Outotec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insteel Industries and Metso Outotec Oyj, you can compare the effects of market volatilities on Insteel Industries and Metso Outotec 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 Metso Outotec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insteel Industries and Metso Outotec.

Diversification Opportunities for Insteel Industries and Metso Outotec

-0.45
  Correlation Coefficient

Very good diversification

The 3 months correlation between Insteel and Metso is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Metso Outotec Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metso Outotec Oyj 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 Metso Outotec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metso Outotec Oyj has no effect on the direction of Insteel Industries i.e., Insteel Industries and Metso Outotec go up and down completely randomly.

Pair Corralation between Insteel Industries and Metso Outotec

Assuming the 90 days horizon Insteel Industries is expected to generate 1.97 times less return on investment than Metso Outotec. In addition to that, Insteel Industries is 1.15 times more volatile than Metso Outotec Oyj. It trades about 0.01 of its total potential returns per unit of risk. Metso Outotec Oyj is currently generating about 0.02 per unit of volatility. If you would invest  869.00  in Metso Outotec Oyj on September 14, 2024 and sell it today you would earn a total of  46.00  from holding Metso Outotec Oyj or generate 5.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy99.64%
ValuesDaily Returns

Insteel Industries  vs.  Metso Outotec Oyj

 Performance 
       Timeline  
Insteel Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Insteel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Insteel Industries is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.
Metso Outotec Oyj 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Metso Outotec Oyj are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Metso Outotec may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Insteel Industries and Metso Outotec Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Insteel Industries and Metso Outotec

The main advantage of trading using opposite Insteel Industries and Metso Outotec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries position performs unexpectedly, Metso Outotec 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 Metso Outotec will offset losses from the drop in Metso Outotec's long position.
The idea behind Insteel Industries and Metso Outotec Oyj 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.
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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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