Correlation Between Alcoa Corp and Reliance Steel

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

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

Diversification Opportunities for Alcoa Corp and Reliance Steel

-0.29

Correlation Coefficient

Alcoa Corp  Reliance Steel

Very good diversification

The 3 months correlation between Alcoa and Reliance is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp i.e., Alcoa Corp and Reliance Steel go up and down completely randomly.

Pair Corralation between Alcoa Corp and Reliance Steel

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Reliance Steel. In addition to that, Alcoa Corp is 1.99 times more volatile than Reliance Steel Aluminum. It trades about -0.07 of its total potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.13 per unit of volatility. If you would invest  26,509  in Reliance Steel Aluminum on December 28, 2024 and sell it today you would earn a total of  2,873  from holding Reliance Steel Aluminum or generate 10.84% return on investment over 90 days.

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

Alcoa Corp  vs.  Reliance Steel Aluminum

Alcoa Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Reliance Steel Aluminum

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Reliance Steel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alcoa Corp and Reliance Steel

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

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.