Correlation Between Reliance Steel and PKSHA TECHNOLOGY

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

Diversification Opportunities for Reliance Steel and PKSHA TECHNOLOGY

0.31

Correlation Coefficient

Reliance Steel  PKSHA TECHNOLOGY

Weak diversification

The 3 months correlation between Reliance and PKSHA is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and PKSHA TECHNOLOGY INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PKSHA TECHNOLOGY 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 PKSHA TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PKSHA TECHNOLOGY INC has no effect on the direction of Reliance Steel i.e., Reliance Steel and PKSHA TECHNOLOGY go up and down completely randomly.

Pair Corralation between Reliance Steel and PKSHA TECHNOLOGY

Assuming the 90 days horizon Reliance Steel Aluminum is expected to generate 0.4 times more return on investment than PKSHA TECHNOLOGY. However, Reliance Steel Aluminum is 2.5 times less risky than PKSHA TECHNOLOGY. It trades about -0.08 of its potential returns per unit of risk. PKSHA TECHNOLOGY INC is currently generating about -0.06 per unit of risk. If you would invest  30,450  in Reliance Steel Aluminum on November 29, 2024 and sell it today you would lose (2,230) from holding Reliance Steel Aluminum or give up 7.32% 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.  PKSHA TECHNOLOGY INC

Reliance Steel Aluminum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reliance Steel Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

PKSHA TECHNOLOGY INC

Risk-Adjusted Performance

Weak

Over the last 90 days PKSHA TECHNOLOGY INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Reliance Steel and PKSHA TECHNOLOGY

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

The idea behind Reliance Steel Aluminum and PKSHA TECHNOLOGY INC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.