Correlation Between Insteel Industries and Booking Holdings
Can any of the company-specific risk be diversified away by investing in both Insteel Industries and Booking 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 Booking 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 Booking Holdings, you can compare the effects of market volatilities on Insteel Industries and Booking 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 Booking Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insteel Industries and Booking Holdings.
Diversification Opportunities for Insteel Industries and Booking Holdings
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Insteel and Booking is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking 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 Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of Insteel Industries i.e., Insteel Industries and Booking Holdings go up and down completely randomly.
Pair Corralation between Insteel Industries and Booking Holdings
Assuming the 90 days horizon Insteel Industries is expected to generate 1.12 times more return on investment than Booking Holdings. However, Insteel Industries is 1.12 times more volatile than Booking Holdings. It trades about 0.12 of its potential returns per unit of risk. Booking Holdings is currently generating about -0.12 per unit of risk. If you would invest 2,620 in Insteel Industries on October 29, 2024 and sell it today you would earn a total of 120.00 from holding Insteel Industries or generate 4.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insteel Industries vs. Booking Holdings
Performance |
| Timeline |
| Insteel Industries |
| Booking Holdings |
Insteel Industries and Booking Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insteel Industries and Booking Holdings
The main advantage of trading using opposite Insteel Industries and Booking Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries position performs unexpectedly, Booking 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 Booking Holdings will offset losses from the drop in Booking Holdings' long position.| Insteel Industries vs. Apollo Medical Holdings | Insteel Industries vs. LG Electronics | Insteel Industries vs. TT Electronics PLC | Insteel Industries vs. STMICROELECTRONICS |
| Booking Holdings vs. MGIC INVESTMENT | Booking Holdings vs. New Residential Investment | Booking Holdings vs. Entravision Communications | Booking Holdings vs. AGNC INVESTMENT |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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