Correlation Between Gold Road and RELIANCE STEEL

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

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

Diversification Opportunities for Gold Road and RELIANCE STEEL

0.4

Correlation Coefficient

Gold Road  RELIANCE STEEL

Very weak diversification

The 3 months correlation between Gold and RELIANCE is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources 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 Gold Road 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 Gold Road Resources 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 Gold Road i.e., Gold Road and RELIANCE STEEL go up and down completely randomly.

Pair Corralation between Gold Road and RELIANCE STEEL

Assuming the 90 days horizon Gold Road Resources is expected to generate 1.41 times more return on investment than RELIANCE STEEL. However, Gold Road is 1.41 times more volatile than RELIANCE STEEL AL. It trades about 0.16 of its potential returns per unit of risk. RELIANCE STEEL AL is currently generating about 0.07 per unit of risk. If you would invest  99.00  in Gold Road Resources on September 20, 2024 and sell it today you would earn a total of  25.00  from holding Gold Road Resources or generate 25.25% return on investment over 90 days.

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

Gold Road Resources  vs.  RELIANCE STEEL AL

Gold Road Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gold Road reported solid returns over the last few months and may actually be approaching a breakup point.

RELIANCE STEEL AL

Risk-Adjusted Performance

5 of 100

Insignificant

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

Pair Trading with Gold Road and RELIANCE STEEL

The main advantage of trading using opposite Gold Road and RELIANCE STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Road 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 Gold Road Resources 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 CEOs Directory module to screen CEOs from public companies around the world.