Correlation Between Reliance Steel and Aena SME

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

Diversification Opportunities for Reliance Steel and Aena SME

0.52

Correlation Coefficient

Reliance Steel  Aena SME

Very weak diversification

The 3 months correlation between Reliance and Aena is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Aena SME SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aena SME SA 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 Aena SME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aena SME SA has no effect on the direction of Reliance Steel i.e., Reliance Steel and Aena SME go up and down completely randomly.

Pair Corralation between Reliance Steel and Aena SME

Assuming the 90 days horizon Reliance Steel is expected to generate 1.56 times less return on investment than Aena SME. In addition to that, Reliance Steel is 1.51 times more volatile than Aena SME SA. It trades about 0.03 of its total potential returns per unit of risk. Aena SME SA is currently generating about 0.08 per unit of volatility. If you would invest  13,751  in Aena SME SA on December 2, 2024 and sell it today you would earn a total of  7,629  from holding Aena SME SA or generate 55.48% return on investment over 90 days.

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

Reliance Steel Aluminum  vs.  Aena SME SA

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 fragile 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.

Aena SME SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aena SME SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aena SME 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 Aena SME

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

The idea behind Reliance Steel Aluminum and Aena SME SA 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..