Correlation Between Allianz SE and Reliance Steel

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

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

Diversification Opportunities for Allianz SE and Reliance Steel

-0.26

Correlation Coefficient

Allianz SE  Reliance Steel

Very good diversification

The 3 months correlation between Allianz and Reliance is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Allianz SE VNA 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 Allianz SE 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 Allianz SE VNA 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 Allianz SE i.e., Allianz SE and Reliance Steel go up and down completely randomly.

Pair Corralation between Allianz SE and Reliance Steel

Assuming the 90 days trading horizon Allianz SE VNA is expected to generate 0.52 times more return on investment than Reliance Steel. However, Allianz SE VNA is 1.92 times less risky than Reliance Steel. It trades about -0.08 of its potential returns per unit of risk. Reliance Steel Aluminum is currently generating about -0.62 per unit of risk. If you would invest  30,010  in Allianz SE VNA on October 5, 2024 and sell it today you would lose (330.00) from holding Allianz SE VNA or give up 1.1% of portfolio value over 90 days.

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

Allianz SE VNA  vs.  Reliance Steel Aluminum

Allianz SE VNA

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Allianz SE VNA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Allianz SE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Reliance Steel Aluminum

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Reliance Steel Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Reliance Steel is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Allianz SE and Reliance Steel

The main advantage of trading using opposite Allianz SE and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allianz SE 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 Allianz SE VNA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.