Correlation Between RELIANCE STEEL and TOWNSQUARE MEDIA

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

Diversification Opportunities for RELIANCE STEEL and TOWNSQUARE MEDIA

0.28

Correlation Coefficient

RELIANCE STEEL  TOWNSQUARE MEDIA

Modest diversification

The 3 months correlation between RELIANCE and TOWNSQUARE is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding RELIANCE STEEL AL and TOWNSQUARE MEDIA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOWNSQUARE MEDIA INC 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 TOWNSQUARE MEDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOWNSQUARE MEDIA INC has no effect on the direction of RELIANCE STEEL i.e., RELIANCE STEEL and TOWNSQUARE MEDIA go up and down completely randomly.

Pair Corralation between RELIANCE STEEL and TOWNSQUARE MEDIA

Assuming the 90 days trading horizon RELIANCE STEEL AL is expected to generate 0.68 times more return on investment than TOWNSQUARE MEDIA. However, RELIANCE STEEL AL is 1.47 times less risky than TOWNSQUARE MEDIA. It trades about 0.01 of its potential returns per unit of risk. TOWNSQUARE MEDIA INC is currently generating about -0.19 per unit of risk. If you would invest  26,010  in RELIANCE STEEL AL on December 11, 2024 and sell it today you would lose (30.00) from holding RELIANCE STEEL AL or give up 0.12% of portfolio value over 90 days.

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

RELIANCE STEEL AL  vs.  TOWNSQUARE MEDIA INC

RELIANCE STEEL AL

Risk-Adjusted Performance

Very Weak

Over the last 90 days RELIANCE STEEL AL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

TOWNSQUARE MEDIA INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days TOWNSQUARE MEDIA INC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with RELIANCE STEEL and TOWNSQUARE MEDIA

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

The idea behind RELIANCE STEEL AL and TOWNSQUARE MEDIA INC 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.