Correlation Between AURUBIS AG and Reliance Steel

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

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

Diversification Opportunities for AURUBIS AG and Reliance Steel

0.78

Correlation Coefficient

AURUBIS AG  Reliance Steel

Poor diversification

The 3 months correlation between AURUBIS and Reliance is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding AURUBIS AG UNSPADR 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 AURUBIS AG 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 AURUBIS AG UNSPADR 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 AURUBIS AG i.e., AURUBIS AG and Reliance Steel go up and down completely randomly.

Pair Corralation between AURUBIS AG and Reliance Steel

Assuming the 90 days trading horizon AURUBIS AG UNSPADR is expected to generate 1.16 times more return on investment than Reliance Steel. However, AURUBIS AG is 1.16 times more volatile than Reliance Steel Aluminum. It trades about 0.14 of its potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.03 per unit of risk. If you would invest  3,240  in AURUBIS AG UNSPADR on September 19, 2024 and sell it today you would earn a total of  540.00  from holding AURUBIS AG UNSPADR or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.67%
Values	Daily Returns

AURUBIS AG UNSPADR  vs.  Reliance Steel Aluminum

AURUBIS AG UNSPADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AURUBIS AG UNSPADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AURUBIS AG reported solid returns over the last few months and may actually be approaching a breakup point.

Reliance Steel Aluminum

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly 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 AURUBIS AG and Reliance Steel

The main advantage of trading using opposite AURUBIS AG and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AURUBIS AG 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 AURUBIS AG UNSPADR 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.