Correlation Between Reliance Steel and Esfera Robotics

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

Diversification Opportunities for Reliance Steel and Esfera Robotics

0.74

Correlation Coefficient

Reliance Steel  Esfera Robotics

Poor diversification

The 3 months correlation between Reliance and Esfera is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Esfera Robotics R in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esfera Robotics R 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 Esfera Robotics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esfera Robotics R has no effect on the direction of Reliance Steel i.e., Reliance Steel and Esfera Robotics go up and down completely randomly.

Pair Corralation between Reliance Steel and Esfera Robotics

Assuming the 90 days horizon Reliance Steel is expected to generate 6.78 times less return on investment than Esfera Robotics. In addition to that, Reliance Steel is 1.92 times more volatile than Esfera Robotics R. It trades about 0.02 of its total potential returns per unit of risk. Esfera Robotics R is currently generating about 0.2 per unit of volatility. If you would invest  30,966  in Esfera Robotics R on October 1, 2024 and sell it today you would earn a total of  4,602  from holding Esfera Robotics R or generate 14.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Reliance Steel Aluminum  vs.  Esfera Robotics R

Reliance Steel Aluminum

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Reliance Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Esfera Robotics R

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Esfera Robotics R are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat fragile basic indicators, Esfera Robotics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Steel and Esfera Robotics

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

The idea behind Reliance Steel Aluminum and Esfera Robotics R 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.