Correlation Between Reliance Steel and Acerinox

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

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

Diversification Opportunities for Reliance Steel and Acerinox

0.04

Correlation Coefficient

Reliance Steel  Acerinox

Significant diversification

The 3 months correlation between Reliance and Acerinox is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Acerinox SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acerinox SA ADR and Reliance Steel 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 Reliance Steel Aluminum are associated (or correlated) with Acerinox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acerinox SA ADR has no effect on the direction of Reliance Steel i.e., Reliance Steel and Acerinox go up and down completely randomly.

Pair Corralation between Reliance Steel and Acerinox

Allowing for the 90-day total investment horizon Reliance Steel Aluminum is expected to under-perform the Acerinox. In addition to that, Reliance Steel is 1.09 times more volatile than Acerinox SA ADR. It trades about 0.0 of its total potential returns per unit of risk. Acerinox SA ADR is currently generating about 0.0 per unit of volatility. If you would invest  496.00  in Acerinox SA ADR on October 24, 2024 and sell it today you would lose (4.00) from holding Acerinox SA ADR or give up 0.81% of portfolio value over 90 days.

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

Reliance Steel Aluminum  vs.  Acerinox SA ADR

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. In spite of comparatively stable basic indicators, Reliance Steel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Acerinox SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acerinox SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Acerinox is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Reliance Steel and Acerinox

The main advantage of trading using opposite Reliance Steel and Acerinox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, Acerinox 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 Acerinox will offset losses from the drop in Acerinox's long position.

The idea behind Reliance Steel Aluminum and Acerinox SA ADR 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.