Correlation Between Reliance Steel and Advanced Micro

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

Diversification Opportunities for Reliance Steel and Advanced Micro

-0.36

Correlation Coefficient

Reliance Steel  Advanced Micro

Very good diversification

The 3 months correlation between Reliance and Advanced is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices 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 Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of Reliance Steel i.e., Reliance Steel and Advanced Micro go up and down completely randomly.

Pair Corralation between Reliance Steel and Advanced Micro

Assuming the 90 days horizon Reliance Steel is expected to generate 2.19 times less return on investment than Advanced Micro. But when comparing it to its historical volatility, Reliance Steel Aluminum is 1.65 times less risky than Advanced Micro. It trades about 0.04 of its potential returns per unit of risk. Advanced Micro Devices is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,618  in Advanced Micro Devices on October 5, 2024 and sell it today you would earn a total of  5,372  from holding Advanced Micro Devices or generate 81.17% 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.  Advanced Micro Devices

Reliance Steel Aluminum

Risk-Adjusted Performance

0 of 100

Weak

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

Advanced Micro Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Micro Devices 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Reliance Steel and Advanced Micro

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

The idea behind Reliance Steel Aluminum and Advanced Micro Devices 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.