Correlation Between Reliance Steel and Ero Copper

Can any of the company-specific risk be diversified away by investing in both Reliance Steel and Ero Copper 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 Ero Copper 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 Ero Copper Corp, you can compare the effects of market volatilities on Reliance Steel and Ero Copper 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 Ero Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and Ero Copper.

Diversification Opportunities for Reliance Steel and Ero Copper

-0.78

Correlation Coefficient

Reliance Steel  Ero Copper

Pay attention - limited upside

The 3 months correlation between Reliance and Ero is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Ero Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ero Copper Corp 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 Ero Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ero Copper Corp has no effect on the direction of Reliance Steel i.e., Reliance Steel and Ero Copper go up and down completely randomly.

Pair Corralation between Reliance Steel and Ero Copper

Allowing for the 90-day total investment horizon Reliance Steel Aluminum is expected to generate 0.42 times more return on investment than Ero Copper. However, Reliance Steel Aluminum is 2.41 times less risky than Ero Copper. It trades about -0.22 of its potential returns per unit of risk. Ero Copper Corp is currently generating about -0.24 per unit of risk. If you would invest  32,206  in Reliance Steel Aluminum on September 12, 2024 and sell it today you would lose (1,577) from holding Reliance Steel Aluminum or give up 4.9% of portfolio value over 90 days.

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

Reliance Steel Aluminum  vs.  Ero Copper Corp

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. In spite of comparatively uncertain basic indicators, Reliance Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ero Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ero Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with Reliance Steel and Ero Copper

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

The idea behind Reliance Steel Aluminum and Ero Copper Corp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.