Correlation Between Reliance Steel and Amcor Plc

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

Diversification Opportunities for Reliance Steel and Amcor Plc

-0.02

Correlation Coefficient

Reliance Steel  Amcor Plc

Good diversification

The 3 months correlation between Reliance and Amcor is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Amcor plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amcor plc 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 Amcor Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amcor plc has no effect on the direction of Reliance Steel i.e., Reliance Steel and Amcor Plc go up and down completely randomly.

Pair Corralation between Reliance Steel and Amcor Plc

Assuming the 90 days horizon Reliance Steel Aluminum is expected to under-perform the Amcor Plc. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Steel Aluminum is 1.06 times less risky than Amcor Plc. The stock trades about -0.01 of its potential returns per unit of risk. The Amcor plc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  888.00  in Amcor plc on September 21, 2024 and sell it today you would earn a total of  2.00  from holding Amcor plc or generate 0.23% 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.  Amcor plc

Reliance Steel Aluminum

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Reliance Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Amcor plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amcor plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Amcor Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Reliance Steel and Amcor Plc

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

The idea behind Reliance Steel Aluminum and Amcor plc 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..