Correlation Between Reliance Steel and Packaging

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

Diversification Opportunities for Reliance Steel and Packaging

0.87

Correlation Coefficient

Reliance Steel  Packaging

Very poor diversification

The 3 months correlation between Reliance and Packaging is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Packaging of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Packaging 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 Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Packaging has no effect on the direction of Reliance Steel i.e., Reliance Steel and Packaging go up and down completely randomly.

Pair Corralation between Reliance Steel and Packaging

Assuming the 90 days horizon Reliance Steel Aluminum is expected to under-perform the Packaging. In addition to that, Reliance Steel is 2.36 times more volatile than Packaging of. It trades about -0.54 of its total potential returns per unit of risk. Packaging of is currently generating about -0.6 per unit of volatility. If you would invest  23,356  in Packaging of on September 25, 2024 and sell it today you would lose (1,666) from holding Packaging of or give up 7.13% of portfolio value over 90 days.

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

Reliance Steel Aluminum  vs.  Packaging of

Reliance Steel Aluminum

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Reliance Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Packaging

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Packaging of are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Packaging reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Steel and Packaging

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

The idea behind Reliance Steel Aluminum and Packaging of 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.