Correlation Between Reliance Steel and Idemitsu Kosan

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

Diversification Opportunities for Reliance Steel and Idemitsu Kosan

-0.47

Correlation Coefficient

Reliance Steel  Idemitsu Kosan

Very good diversification

The 3 months correlation between Reliance and Idemitsu is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Idemitsu Kosan CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Idemitsu Kosan CoLtd 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 Idemitsu Kosan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Idemitsu Kosan CoLtd has no effect on the direction of Reliance Steel i.e., Reliance Steel and Idemitsu Kosan go up and down completely randomly.

Pair Corralation between Reliance Steel and Idemitsu Kosan

Assuming the 90 days horizon Reliance Steel is expected to generate 1.58 times less return on investment than Idemitsu Kosan. But when comparing it to its historical volatility, Reliance Steel Aluminum is 1.05 times less risky than Idemitsu Kosan. It trades about 0.06 of its potential returns per unit of risk. Idemitsu Kosan CoLtd is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  625.00  in Idemitsu Kosan CoLtd on December 28, 2024 and sell it today you would earn a total of  60.00  from holding Idemitsu Kosan CoLtd or generate 9.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Reliance Steel Aluminum  vs.  Idemitsu Kosan CoLtd

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.

Idemitsu Kosan CoLtd

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Idemitsu Kosan CoLtd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Idemitsu Kosan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Reliance Steel and Idemitsu Kosan

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

The idea behind Reliance Steel Aluminum and Idemitsu Kosan CoLtd 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.