Correlation Between CHIBA BANK and Reliance Steel

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

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

Diversification Opportunities for CHIBA BANK and Reliance Steel

0.38

Correlation Coefficient

CHIBA BANK  Reliance Steel

Weak diversification

The 3 months correlation between CHIBA and Reliance is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding CHIBA BANK 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 CHIBA BANK 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 CHIBA BANK 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 CHIBA BANK i.e., CHIBA BANK and Reliance Steel go up and down completely randomly.

Pair Corralation between CHIBA BANK and Reliance Steel

Assuming the 90 days trading horizon CHIBA BANK is expected to generate 1.17 times more return on investment than Reliance Steel. However, CHIBA BANK is 1.17 times more volatile than Reliance Steel Aluminum. It trades about 0.23 of its potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.16 per unit of risk. If you would invest  735.00  in CHIBA BANK on December 2, 2024 and sell it today you would earn a total of  120.00  from holding CHIBA BANK or generate 16.33% return on investment over 90 days.

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

CHIBA BANK  vs.  Reliance Steel Aluminum

CHIBA BANK

Risk-Adjusted Performance

Modest

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

Reliance Steel Aluminum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reliance Steel Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CHIBA BANK and Reliance Steel

The main advantage of trading using opposite CHIBA BANK and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHIBA BANK 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 CHIBA BANK 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.