Correlation Between Reliance Steel and United Utilities
Can any of the company-specific risk be diversified away by investing in both Reliance Steel and United Utilities 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 United Utilities 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 United Utilities Group, you can compare the effects of market volatilities on Reliance Steel and United Utilities 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 United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and United Utilities.
Diversification Opportunities for Reliance Steel and United Utilities
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Reliance and United is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of Reliance Steel i.e., Reliance Steel and United Utilities go up and down completely randomly.
Pair Corralation between Reliance Steel and United Utilities
Assuming the 90 days horizon Reliance Steel Aluminum is expected to generate 0.8 times more return on investment than United Utilities. However, Reliance Steel Aluminum is 1.25 times less risky than United Utilities. It trades about 0.07 of its potential returns per unit of risk. United Utilities Group is currently generating about -0.04 per unit of risk. If you would invest 25,671 in Reliance Steel Aluminum on December 29, 2024 and sell it today you would earn a total of 1,609 from holding Reliance Steel Aluminum or generate 6.27% 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. United Utilities Group
Performance |
Timeline |
Reliance Steel Aluminum |
United Utilities |
Reliance Steel and United Utilities Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Reliance Steel and United Utilities
The main advantage of trading using opposite Reliance Steel and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, United Utilities 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 United Utilities will offset losses from the drop in United Utilities' long position.Reliance Steel vs. The Boston Beer | Reliance Steel vs. Atresmedia Corporacin de | Reliance Steel vs. G III Apparel Group | Reliance Steel vs. Media and Games |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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