Correlation Between Reliance Steel and Bosideng International

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

Diversification Opportunities for Reliance Steel and Bosideng International

0.24

Correlation Coefficient

Reliance Steel  Bosideng International

Modest diversification

The 3 months correlation between Reliance and Bosideng is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Bosideng International Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bosideng International 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 Bosideng International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bosideng International has no effect on the direction of Reliance Steel i.e., Reliance Steel and Bosideng International go up and down completely randomly.

Pair Corralation between Reliance Steel and Bosideng International

Assuming the 90 days horizon Reliance Steel is expected to generate 1.42 times less return on investment than Bosideng International. But when comparing it to its historical volatility, Reliance Steel Aluminum is 2.11 times less risky than Bosideng International. It trades about 0.13 of its potential returns per unit of risk. Bosideng International Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Bosideng International Holdings on September 12, 2024 and sell it today you would earn a total of  8.00  from holding Bosideng International Holdings or generate 20.0% return on investment over 90 days.

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

Reliance Steel Aluminum  vs.  Bosideng International Holding

Reliance Steel Aluminum

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Reliance Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Bosideng International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bosideng International Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bosideng International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Steel and Bosideng International

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

The idea behind Reliance Steel Aluminum and Bosideng International Holdings 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.