Correlation Between Insteel Industries and MCF Energy
Can any of the company-specific risk be diversified away by investing in both Insteel Industries and MCF Energy 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 MCF Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insteel Industries and MCF Energy, you can compare the effects of market volatilities on Insteel Industries and MCF Energy 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 MCF Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insteel Industries and MCF Energy.
Diversification Opportunities for Insteel Industries and MCF Energy
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Insteel and MCF is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and MCF Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCF Energy 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 MCF Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCF Energy has no effect on the direction of Insteel Industries i.e., Insteel Industries and MCF Energy go up and down completely randomly.
Pair Corralation between Insteel Industries and MCF Energy
Given the investment horizon of 90 days Insteel Industries is expected to generate 0.37 times more return on investment than MCF Energy. However, Insteel Industries is 2.69 times less risky than MCF Energy. It trades about 0.02 of its potential returns per unit of risk. MCF Energy is currently generating about -0.04 per unit of risk. If you would invest 2,718 in Insteel Industries on September 12, 2024 and sell it today you would earn a total of 248.00 from holding Insteel Industries or generate 9.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.58% |
| Values | Daily Returns |
Insteel Industries vs. MCF Energy
Performance |
| Timeline |
| Insteel Industries |
| MCF Energy |
Insteel Industries and MCF Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insteel Industries and MCF Energy
The main advantage of trading using opposite Insteel Industries and MCF Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries position performs unexpectedly, MCF Energy 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 MCF Energy will offset losses from the drop in MCF Energy's long position.| Insteel Industries vs. Mayville Engineering Co | Insteel Industries vs. Gulf Island Fabrication | Insteel Industries vs. ESAB Corp | Insteel Industries vs. Northwest Pipe |
| MCF Energy vs. Kaltura | MCF Energy vs. Univest Pennsylvania | MCF Energy vs. CDW Corp | MCF Energy vs. Paltalk |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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