Correlation Between RELIANCE STEEL and Hercules Capital

Can any of the company-specific risk be diversified away by investing in both RELIANCE STEEL and Hercules Capital 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 Hercules Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RELIANCE STEEL AL and Hercules Capital, you can compare the effects of market volatilities on RELIANCE STEEL and Hercules Capital 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 Hercules Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of RELIANCE STEEL and Hercules Capital.

Diversification Opportunities for RELIANCE STEEL and Hercules Capital

0.78

Correlation Coefficient

RELIANCE STEEL  Hercules Capital

Poor diversification

The 3 months correlation between RELIANCE and Hercules is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding RELIANCE STEEL AL and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital 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 AL are associated (or correlated) with Hercules Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hercules Capital has no effect on the direction of RELIANCE STEEL i.e., RELIANCE STEEL and Hercules Capital go up and down completely randomly.

Pair Corralation between RELIANCE STEEL and Hercules Capital

Assuming the 90 days trading horizon RELIANCE STEEL AL is expected to generate 0.62 times more return on investment than Hercules Capital. However, RELIANCE STEEL AL is 1.62 times less risky than Hercules Capital. It trades about 0.02 of its potential returns per unit of risk. Hercules Capital is currently generating about 0.0 per unit of risk. If you would invest  25,682  in RELIANCE STEEL AL on December 23, 2024 and sell it today you would earn a total of  228.00  from holding RELIANCE STEEL AL or generate 0.89% return on investment over 90 days.

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

RELIANCE STEEL AL  vs.  Hercules Capital

RELIANCE STEEL AL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RELIANCE STEEL AL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, RELIANCE STEEL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Hercules Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hercules Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hercules Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with RELIANCE STEEL and Hercules Capital

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

The idea behind RELIANCE STEEL AL and Hercules Capital 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.