Correlation Between Reliance Steel and CITIC Telecom

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

Diversification Opportunities for Reliance Steel and CITIC Telecom

0.34

Correlation Coefficient

Reliance Steel  CITIC Telecom

Weak diversification

The 3 months correlation between Reliance and CITIC is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and CITIC Telecom International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Telecom Intern 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 CITIC Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Telecom Intern has no effect on the direction of Reliance Steel i.e., Reliance Steel and CITIC Telecom go up and down completely randomly.

Pair Corralation between Reliance Steel and CITIC Telecom

Assuming the 90 days horizon Reliance Steel Aluminum is expected to generate 0.36 times more return on investment than CITIC Telecom. However, Reliance Steel Aluminum is 2.78 times less risky than CITIC Telecom. It trades about 0.07 of its potential returns per unit of risk. CITIC Telecom International is currently generating about 0.02 per unit of risk. If you would invest  25,671  in Reliance Steel Aluminum on December 29, 2024 and sell it today you would earn a total of  1,609  from holding Reliance Steel Aluminum or generate 6.27% 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.  CITIC Telecom International

Reliance Steel Aluminum

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 5 (%) 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 April 2025.

CITIC Telecom Intern

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Telecom International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CITIC Telecom 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 CITIC Telecom

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

The idea behind Reliance Steel Aluminum and CITIC Telecom International 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.