Correlation Between PERENNIAL ENERGY and Reliance Steel

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

By analyzing existing cross correlation between PERENNIAL ENERGY HD 01 and Reliance Steel Aluminum, you can compare the effects of market volatilities on PERENNIAL ENERGY 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 PERENNIAL ENERGY with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of PERENNIAL ENERGY and Reliance Steel.

Diversification Opportunities for PERENNIAL ENERGY and Reliance Steel

0.26

Correlation Coefficient

PERENNIAL ENERGY  Reliance Steel

Modest diversification

The 3 months correlation between PERENNIAL and Reliance is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding PERENNIAL ENERGY HD 01 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 PERENNIAL ENERGY 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 PERENNIAL ENERGY HD 01 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 PERENNIAL ENERGY i.e., PERENNIAL ENERGY and Reliance Steel go up and down completely randomly.

Pair Corralation between PERENNIAL ENERGY and Reliance Steel

Assuming the 90 days horizon PERENNIAL ENERGY HD 01 is expected to generate 3.02 times more return on investment than Reliance Steel. However, PERENNIAL ENERGY is 3.02 times more volatile than Reliance Steel Aluminum. It trades about 0.07 of its potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.02 per unit of risk. If you would invest  5.89  in PERENNIAL ENERGY HD 01 on October 5, 2024 and sell it today you would earn a total of  5.11  from holding PERENNIAL ENERGY HD 01 or generate 86.76% return on investment over 90 days.

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

PERENNIAL ENERGY HD 01  vs.  Reliance Steel Aluminum

PERENNIAL ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PERENNIAL ENERGY HD 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Reliance Steel Aluminum

Risk-Adjusted Performance

0 of 100

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 PERENNIAL ENERGY and Reliance Steel

The main advantage of trading using opposite PERENNIAL ENERGY and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PERENNIAL ENERGY 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 PERENNIAL ENERGY HD 01 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.