Correlation Between Reliance Steel and Pimco Dynamic

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

Diversification Opportunities for Reliance Steel and Pimco Dynamic

-0.32

Correlation Coefficient

Reliance Steel  Pimco Dynamic

Very good diversification

The 3 months correlation between Reliance and Pimco is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Pimco Dynamic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Dynamic Income 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 Pimco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Dynamic Income has no effect on the direction of Reliance Steel i.e., Reliance Steel and Pimco Dynamic go up and down completely randomly.

Pair Corralation between Reliance Steel and Pimco Dynamic

Allowing for the 90-day total investment horizon Reliance Steel Aluminum is expected to generate 3.19 times more return on investment than Pimco Dynamic. However, Reliance Steel is 3.19 times more volatile than Pimco Dynamic Income. It trades about 0.05 of its potential returns per unit of risk. Pimco Dynamic Income is currently generating about -0.03 per unit of risk. If you would invest  27,832  in Reliance Steel Aluminum on September 14, 2024 and sell it today you would earn a total of  1,570  from holding Reliance Steel Aluminum or generate 5.64% return on investment over 90 days.

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

Reliance Steel Aluminum  vs.  Pimco Dynamic Income

Reliance Steel Aluminum

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Reliance Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pimco Dynamic Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Dynamic Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Pimco Dynamic is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Reliance Steel and Pimco Dynamic

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

The idea behind Reliance Steel Aluminum and Pimco Dynamic Income 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.