Correlation Between Reliance Steel and Intel

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

Diversification Opportunities for Reliance Steel and Intel

0.64

Correlation Coefficient

Reliance Steel  Intel

Poor diversification

The 3 months correlation between Reliance and Intel is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of Reliance Steel i.e., Reliance Steel and Intel go up and down completely randomly.

Pair Corralation between Reliance Steel and Intel

Assuming the 90 days horizon Reliance Steel Aluminum is expected to under-perform the Intel. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Steel Aluminum is 2.48 times less risky than Intel. The stock trades about -0.08 of its potential returns per unit of risk. The Intel is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,233  in Intel on November 28, 2024 and sell it today you would lose (43.00) from holding Intel or give up 1.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Reliance Steel Aluminum  vs.  Intel

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 uncertain 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.

Intel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Intel is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Reliance Steel and Intel

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

The idea behind Reliance Steel Aluminum and Intel 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.