Correlation Between Reliance Steel and SHIMANO INC

Can any of the company-specific risk be diversified away by investing in both Reliance Steel and SHIMANO INC 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 SHIMANO INC 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 SHIMANO INC UNSPADR10, you can compare the effects of market volatilities on Reliance Steel and SHIMANO INC 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 SHIMANO INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and SHIMANO INC.

Diversification Opportunities for Reliance Steel and SHIMANO INC

-0.19

Correlation Coefficient

Reliance Steel  SHIMANO INC

Good diversification

The 3 months correlation between Reliance and SHIMANO is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and SHIMANO INC UNSPADR10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIMANO INC UNSPADR10 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 SHIMANO INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHIMANO INC UNSPADR10 has no effect on the direction of Reliance Steel i.e., Reliance Steel and SHIMANO INC go up and down completely randomly.

Pair Corralation between Reliance Steel and SHIMANO INC

Assuming the 90 days horizon Reliance Steel is expected to generate 1.81 times less return on investment than SHIMANO INC. But when comparing it to its historical volatility, Reliance Steel Aluminum is 1.41 times less risky than SHIMANO INC. It trades about 0.04 of its potential returns per unit of risk. SHIMANO INC UNSPADR10 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,260  in SHIMANO INC UNSPADR10 on December 30, 2024 and sell it today you would earn a total of  70.00  from holding SHIMANO INC UNSPADR10 or generate 5.56% return on investment over 90 days.

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

Reliance Steel Aluminum  vs.  SHIMANO INC UNSPADR10

Reliance Steel Aluminum

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 3 (%) 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.

SHIMANO INC UNSPADR10

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SHIMANO INC UNSPADR10 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, SHIMANO INC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Reliance Steel and SHIMANO INC

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

The idea behind Reliance Steel Aluminum and SHIMANO INC UNSPADR10 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.