Correlation Between Reliance Steel and Perusahaan Perseroan

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

Diversification Opportunities for Reliance Steel and Perusahaan Perseroan

-0.68

Correlation Coefficient

Reliance Steel  Perusahaan Perseroan

Excellent diversification

The 3 months correlation between Reliance and Perusahaan is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Perusahaan Perseroan PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perusahaan Perseroan 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 Perusahaan Perseroan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perusahaan Perseroan has no effect on the direction of Reliance Steel i.e., Reliance Steel and Perusahaan Perseroan go up and down completely randomly.

Pair Corralation between Reliance Steel and Perusahaan Perseroan

Assuming the 90 days horizon Reliance Steel Aluminum is expected to generate 1.01 times more return on investment than Perusahaan Perseroan. However, Reliance Steel is 1.01 times more volatile than Perusahaan Perseroan PT. It trades about 0.05 of its potential returns per unit of risk. Perusahaan Perseroan PT is currently generating about -0.02 per unit of risk. If you would invest  18,397  in Reliance Steel Aluminum on September 20, 2024 and sell it today you would earn a total of  8,913  from holding Reliance Steel Aluminum or generate 48.45% return on investment over 90 days.

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

Reliance Steel Aluminum  vs.  Perusahaan Perseroan PT

Reliance Steel Aluminum

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Reliance Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Perusahaan Perseroan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perusahaan Perseroan PT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Reliance Steel and Perusahaan Perseroan

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

The idea behind Reliance Steel Aluminum and Perusahaan Perseroan PT 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.