Correlation Between Aena SME and Reliance Steel

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

By analyzing existing cross correlation between Aena SME SA and Reliance Steel Aluminum, you can compare the effects of market volatilities on Aena SME 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 Aena SME with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aena SME and Reliance Steel.

Diversification Opportunities for Aena SME and Reliance Steel

0.14

Correlation Coefficient

Aena SME  Reliance Steel

Average diversification

The 3 months correlation between Aena and Reliance is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Aena SME SA and Reliance Steel Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Steel Aluminum and Aena SME 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 Aena SME SA 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 Aluminum has no effect on the direction of Aena SME i.e., Aena SME and Reliance Steel go up and down completely randomly.

Pair Corralation between Aena SME and Reliance Steel

Assuming the 90 days horizon Aena SME SA is expected to generate 0.78 times more return on investment than Reliance Steel. However, Aena SME SA is 1.28 times less risky than Reliance Steel. It trades about 0.14 of its potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.07 per unit of risk. If you would invest  19,790  in Aena SME SA on December 29, 2024 and sell it today you would earn a total of  2,090  from holding Aena SME SA or generate 10.56% return on investment over 90 days.

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

Aena SME SA  vs.  Reliance Steel Aluminum

Aena SME SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aena SME SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Aena SME may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Reliance Steel Aluminum

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Reliance Steel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Aena SME and Reliance Steel

The main advantage of trading using opposite Aena SME and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aena SME 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 Aena SME SA and Reliance Steel Aluminum 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.