Correlation Between Barrick Gold and Reliance Steel

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

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

Diversification Opportunities for Barrick Gold and Reliance Steel

0.73

Correlation Coefficient

Barrick Gold  Reliance Steel

Poor diversification

The 3 months correlation between Barrick and Reliance is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Barrick Gold 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 Barrick Gold 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 Barrick Gold 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 Barrick Gold i.e., Barrick Gold and Reliance Steel go up and down completely randomly.

Pair Corralation between Barrick Gold and Reliance Steel

Given the investment horizon of 90 days Barrick Gold Corp is expected to generate 1.31 times more return on investment than Reliance Steel. However, Barrick Gold is 1.31 times more volatile than Reliance Steel Aluminum. It trades about 0.04 of its potential returns per unit of risk. Reliance Steel Aluminum is currently generating about -0.09 per unit of risk. If you would invest  1,749  in Barrick Gold Corp on November 28, 2024 and sell it today you would earn a total of  60.00  from holding Barrick Gold Corp or generate 3.43% return on investment over 90 days.

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

Barrick Gold Corp  vs.  Reliance Steel Aluminum

Barrick Gold Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Barrick Gold Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Barrick Gold is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Barrick Gold and Reliance Steel

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

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.