Correlation Between E3 LITHIUM and Reliance Steel

Can any of the company-specific risk be diversified away by investing in both E3 LITHIUM 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 E3 LITHIUM and Reliance Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between E3 LITHIUM LTD and Reliance Steel Aluminum, you can compare the effects of market volatilities on E3 LITHIUM 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 E3 LITHIUM with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of E3 LITHIUM and Reliance Steel.

Diversification Opportunities for E3 LITHIUM and Reliance Steel

-0.1

Correlation Coefficient

E3 LITHIUM  Reliance Steel

Good diversification

The 3 months correlation between OW3 and Reliance is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding E3 LITHIUM LTD 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 E3 LITHIUM 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 E3 LITHIUM LTD 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 E3 LITHIUM i.e., E3 LITHIUM and Reliance Steel go up and down completely randomly.

Pair Corralation between E3 LITHIUM and Reliance Steel

Assuming the 90 days horizon E3 LITHIUM LTD is expected to generate 2.9 times more return on investment than Reliance Steel. However, E3 LITHIUM is 2.9 times more volatile than Reliance Steel Aluminum. It trades about 0.2 of its potential returns per unit of risk. Reliance Steel Aluminum is currently generating about -0.43 per unit of risk. If you would invest  63.00  in E3 LITHIUM LTD on October 10, 2024 and sell it today you would earn a total of  9.00  from holding E3 LITHIUM LTD or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

E3 LITHIUM LTD  vs.  Reliance Steel Aluminum

E3 LITHIUM LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E3 LITHIUM LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, E3 LITHIUM is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Reliance Steel Aluminum

Risk-Adjusted Performance

0 of 100

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 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 E3 LITHIUM and Reliance Steel

The main advantage of trading using opposite E3 LITHIUM and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E3 LITHIUM 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 E3 LITHIUM LTD 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..