Do You Think the Market Will Calm Down? If so, Check Out These 8 Stocks

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(List compiled by Alexander Crawford. Insider data and price data sourced from Yahoo! Finance, all other data sourced from Finviz.)

The stock market has seen a lot of volatility this past month. Of course, volatility affects your investments, but did you also know that there’s an index that tracks pure market volatility?

The VIX index, also known as the “fear gauge,” measures the implied volatility of S&P 500 index options, and it is supposed to measure investors’ expectations of volatility over the next 30 days. It increases when market uncertainty takes over and investors expect the markets to go haywire. It decreases when investors predict calm.

VIX can be a helpful tool for choosing stocks that do well in calm markets or stocks that do well in uncertain markets, by looking at the correlation of a stock’s performance to the performance of VIX.

If a stock has a positive historical correlation with VIX, it has tended to go up when expected volatility (and uncertainty) increases. These stocks tend to do poorly during calm markets.

As for stocks with negative historical correlation to the VIX, they have tended to perform better in calm markets than rocky ones.

Using this information and VIX data, you can choose stocks based on whether you believe the market will see more or less volatility in the near term. For instance, if you think markets will calm down, you may consider investing in stocks with a negative correlation to VIX, and vice-versa if you predict uncertainty.

To illustrate this concept, we ran a screen on stocks with highly negative correlation to VIX (correlation ranges from -1 to 1) over the last three months, searching for those that have seen significant net insider buying over the last six months. These would be interesting ideas for an investor that believes the markets will calm down in the near future.

What do you think the markets will do? Use this list as a starting-off point for your own analysis, and always remember that past performance is no guarantee of future returns.

Analyze These Ideas (Tools Will Open In A New Window)

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3. Visualize annual returns for all stocks mentioned

List sorted by net insider purchases as a percent of share float.

1. Accuride Corp. (ACW): Engages in the manufacture and supply of components to the commercial vehicle industry in the United States, Canada, and Mexico. Market cap of $392.51M. Correlation to the VIX index at -0.97. Net insider shares purchased over the last six months at 1.01M, which is 3.10% of the company's 32.42M share float. The stock has had a couple of great days, gaining 18.4% over the last week. The stock has performed poorly over the last month, losing 27.32%.

2. Red Lion Hotels Corporation (RLH): Engages in the ownership, operation, and franchising of midscale, full, select, and limited service hotels under the Red Lion brand. Market cap of $133.44M. Correlation to the VIX index at -0.96. Net insider shares purchased over the last six months at 239.44K, which is 2.08% of the company's 11.50M share float. The stock has gained 11.84% over the last year.

3. Winthrop Realty Trust (FUR): Engages in the ownership and management of real property and real estate-related assets. Market cap of $335.86M. Correlation to the VIX index at -0.97. Net insider shares purchased over the last six months at 198.40K, which is 0.68% of the company's 29.16M share float. The stock has had a couple of great days, gaining 5.6% over the last week.

4. Colony Financial, Inc. (CLNY): Focuses on acquiring, originating, and managing commercial mortgage loans and other commercial real estate-related debt investments. Market cap of $525.90M. Correlation to the VIX index at -0.97. Net insider shares purchased over the last six months at 121.03K, which is 0.40% of the company's 30.56M share float. The stock is a short squeeze candidate, with a short float at 8.78% (equivalent to 13.52 days of average volume). The stock has lost 3.79% over the last year.

5. Jefferies Group Inc. (JEF): Operates as a securities and investment banking company in the Americas, Europe, and Asia. Market cap of $3.30B. Correlation to the VIX index at -0.96. Net insider shares purchased over the last six months at 766.0K, which is 0.37% of the company's 207.35M share float. The stock has had a couple of great days, gaining 7.3% over the last week. The stock has performed poorly over the last month, losing 14.29%.

6. Cenveo Inc. (CVO): Operates as a diversified printing company in North America. Market cap of $261.53M. Correlation to the VIX index at -0.95. Net insider shares purchased over the last six months at 125.37K, which is 0.24% of the company's 52.19M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.19). The stock is a short squeeze candidate, with a short float at 8.63% (equivalent to 12.62 days of average volume). The stock has had a couple of great days, gaining 9.5% over the last week.

7. A. Schulman, Inc. (SHLM): Specialty Chemicals Industry. Market cap of $558.20M. Correlation to the VIX index at -0.96. Net insider shares purchased over the last six months at 21.42K, which is 0.07% of the company's 29.85M share float. Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 3.43%, current ratio at 2.14, and quick ratio at 1.34. The stock has had a couple of great days, gaining 5.72% over the last week. The stock has performed poorly over the last month, losing 17.35%.

8. First Financial Bankshares Inc. (FFIN): Provides commercial banking products and services primarily in Texas. Market cap of $928.09M. Correlation to the VIX index at -0.95. Net insider shares purchased over the last six months at 12.56K, which is 0.04% of the company's 29.53M share float. The stock is a short squeeze candidate, with a short float at 17.09% (equivalent to 38.32 days of average volume). The stock has gained 1.69% over the last year.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks


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