Correlation Between RELIANCE STEEL and Prosafe SE

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

Diversification Opportunities for RELIANCE STEEL and Prosafe SE

-0.65

Correlation Coefficient

RELIANCE STEEL  Prosafe SE

Excellent diversification

The 3 months correlation between RELIANCE and Prosafe is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding RELIANCE STEEL AL and Prosafe SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosafe SE 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 Prosafe SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosafe SE has no effect on the direction of RELIANCE STEEL i.e., RELIANCE STEEL and Prosafe SE go up and down completely randomly.

Pair Corralation between RELIANCE STEEL and Prosafe SE

Assuming the 90 days trading horizon RELIANCE STEEL AL is expected to generate 0.09 times more return on investment than Prosafe SE. However, RELIANCE STEEL AL is 11.4 times less risky than Prosafe SE. It trades about -0.53 of its potential returns per unit of risk. Prosafe SE is currently generating about -0.1 per unit of risk. If you would invest  30,030  in RELIANCE STEEL AL on September 22, 2024 and sell it today you would lose (4,550) from holding RELIANCE STEEL AL or give up 15.15% of portfolio value over 90 days.

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

RELIANCE STEEL AL  vs.  Prosafe SE

RELIANCE STEEL AL

Risk-Adjusted Performance

1 of 100

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Prosafe SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prosafe SE 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 Prosafe SE

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

The idea behind RELIANCE STEEL AL and Prosafe SE 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.