Correlation Between Reliance Steel and MAGNUM DCORP
Can any of the company-specific risk be diversified away by investing in both Reliance Steel and MAGNUM DCORP 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 MAGNUM DCORP 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 MAGNUM DCORP INC, you can compare the effects of market volatilities on Reliance Steel and MAGNUM DCORP 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 MAGNUM DCORP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and MAGNUM DCORP.
Diversification Opportunities for Reliance Steel and MAGNUM DCORP
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Reliance and MAGNUM is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and MAGNUM DCORP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAGNUM DCORP INC 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 MAGNUM DCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAGNUM DCORP INC has no effect on the direction of Reliance Steel i.e., Reliance Steel and MAGNUM DCORP go up and down completely randomly.
Pair Corralation between Reliance Steel and MAGNUM DCORP
Assuming the 90 days horizon Reliance Steel Aluminum is expected to under-perform the MAGNUM DCORP. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Steel Aluminum is 26.19 times less risky than MAGNUM DCORP. The stock trades about -0.22 of its potential returns per unit of risk. The MAGNUM DCORP INC is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3.72 in MAGNUM DCORP INC on September 20, 2024 and sell it today you would lose (0.51) from holding MAGNUM DCORP INC or give up 13.71% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Reliance Steel Aluminum vs. MAGNUM DCORP INC
Performance |
Timeline |
Reliance Steel Aluminum |
MAGNUM DCORP INC |
Reliance Steel and MAGNUM DCORP Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Reliance Steel and MAGNUM DCORP
The main advantage of trading using opposite Reliance Steel and MAGNUM DCORP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, MAGNUM DCORP 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 MAGNUM DCORP will offset losses from the drop in MAGNUM DCORP's long position.Reliance Steel vs. GEELY AUTOMOBILE | Reliance Steel vs. LGI Homes | Reliance Steel vs. Commercial Vehicle Group | Reliance Steel vs. Tri Pointe Homes |
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Check out your portfolio center.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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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