Correlation Between Materialise and RELIANCE STEEL

Can any of the company-specific risk be diversified away by investing in both Materialise and RELIANCE STEEL 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 Materialise and RELIANCE STEEL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Materialise NV and RELIANCE STEEL AL, you can compare the effects of market volatilities on Materialise and RELIANCE STEEL 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 Materialise with a short position of RELIANCE STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materialise and RELIANCE STEEL.

Diversification Opportunities for Materialise and RELIANCE STEEL

0.72

Correlation Coefficient

Materialise  RELIANCE STEEL

Poor diversification

The 3 months correlation between Materialise and RELIANCE is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Materialise NV and RELIANCE STEEL AL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RELIANCE STEEL AL and Materialise 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 Materialise NV are associated (or correlated) with RELIANCE STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RELIANCE STEEL AL has no effect on the direction of Materialise i.e., Materialise and RELIANCE STEEL go up and down completely randomly.

Pair Corralation between Materialise and RELIANCE STEEL

Assuming the 90 days trading horizon Materialise NV is expected to generate 2.53 times more return on investment than RELIANCE STEEL. However, Materialise is 2.53 times more volatile than RELIANCE STEEL AL. It trades about 0.19 of its potential returns per unit of risk. RELIANCE STEEL AL is currently generating about 0.01 per unit of risk. If you would invest  450.00  in Materialise NV on September 23, 2024 and sell it today you would earn a total of  275.00  from holding Materialise NV or generate 61.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Materialise NV  vs.  RELIANCE STEEL AL

Materialise NV

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

RELIANCE STEEL AL

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RELIANCE STEEL AL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, RELIANCE STEEL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Materialise and RELIANCE STEEL

The main advantage of trading using opposite Materialise and RELIANCE STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materialise position performs unexpectedly, RELIANCE STEEL 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 RELIANCE STEEL will offset losses from the drop in RELIANCE STEEL's long position.

The idea behind Materialise NV and RELIANCE STEEL AL pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.