Correlation Between Insteel Industries and Highway Holdings
Can any of the company-specific risk be diversified away by investing in both Insteel Industries and Highway 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 Highway 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 Highway Holdings Limited, you can compare the effects of market volatilities on Insteel Industries and Highway 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 Highway Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insteel Industries and Highway Holdings.
Diversification Opportunities for Insteel Industries and Highway Holdings
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Insteel and Highway is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Highway Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway 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 Highway Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highway Holdings has no effect on the direction of Insteel Industries i.e., Insteel Industries and Highway Holdings go up and down completely randomly.
Pair Corralation between Insteel Industries and Highway Holdings
Given the investment horizon of 90 days Insteel Industries is expected to generate 0.66 times more return on investment than Highway Holdings. However, Insteel Industries is 1.51 times less risky than Highway Holdings. It trades about -0.01 of its potential returns per unit of risk. Highway Holdings Limited is currently generating about -0.01 per unit of risk. If you would invest 3,162 in Insteel Industries on August 23, 2024 and sell it today you would lose (154.00) from holding Insteel Industries or give up 4.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insteel Industries vs. Highway Holdings Limited
Performance |
| Timeline |
| Insteel Industries |
| Highway Holdings |
Insteel Industries and Highway Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insteel Industries and Highway Holdings
The main advantage of trading using opposite Insteel Industries and Highway Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries position performs unexpectedly, Highway 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 Highway Holdings will offset losses from the drop in Highway Holdings' long position.| Insteel Industries vs. Haynes International | Insteel Industries vs. Mayville Engineering Co | Insteel Industries vs. Gulf Island Fabrication | Insteel Industries vs. ESAB Corp |
| Highway Holdings vs. Deswell Industries | Highway Holdings vs. Euro Tech Holdings | Highway Holdings vs. China Natural Resources | Highway Holdings vs. Arts Way Manufacturing 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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