Correlation Between Insteel Industries and CompoSecure
Can any of the company-specific risk be diversified away by investing in both Insteel Industries and CompoSecure 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 CompoSecure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insteel Industries and CompoSecure, you can compare the effects of market volatilities on Insteel Industries and CompoSecure 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 CompoSecure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insteel Industries and CompoSecure.
Diversification Opportunities for Insteel Industries and CompoSecure
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Insteel and CompoSecure is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and CompoSecure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompoSecure 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 CompoSecure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompoSecure has no effect on the direction of Insteel Industries i.e., Insteel Industries and CompoSecure go up and down completely randomly.
Pair Corralation between Insteel Industries and CompoSecure
Given the investment horizon of 90 days Insteel Industries is expected to generate 9.36 times less return on investment than CompoSecure. But when comparing it to its historical volatility, Insteel Industries is 1.32 times less risky than CompoSecure. It trades about 0.01 of its potential returns per unit of risk. CompoSecure is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 432.00 in CompoSecure on August 27, 2024 and sell it today you would earn a total of 1,172 from holding CompoSecure or generate 271.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insteel Industries vs. CompoSecure
Performance |
| Timeline |
| Insteel Industries |
| CompoSecure |
Insteel Industries and CompoSecure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insteel Industries and CompoSecure
The main advantage of trading using opposite Insteel Industries and CompoSecure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries position performs unexpectedly, CompoSecure 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 CompoSecure will offset losses from the drop in CompoSecure's long position.| Insteel Industries vs. Haynes International | Insteel Industries vs. Mayville Engineering Co | Insteel Industries vs. Gulf Island Fabrication | Insteel Industries vs. ESAB Corp |
| CompoSecure vs. Northwest Pipe | CompoSecure vs. Insteel Industries | CompoSecure vs. Carpenter Technology | CompoSecure vs. ESAB Corp |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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