Correlation Between RELIANCE STEEL and NEW MILLENNIUM

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

Diversification Opportunities for RELIANCE STEEL and NEW MILLENNIUM

-0.09

Correlation Coefficient

RELIANCE STEEL  NEW MILLENNIUM

Good diversification

The 3 months correlation between RELIANCE and NEW is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding RELIANCE STEEL AL and NEW MILLENNIUM IRON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEW MILLENNIUM IRON 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 NEW MILLENNIUM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEW MILLENNIUM IRON has no effect on the direction of RELIANCE STEEL i.e., RELIANCE STEEL and NEW MILLENNIUM go up and down completely randomly.

Pair Corralation between RELIANCE STEEL and NEW MILLENNIUM

Assuming the 90 days trading horizon RELIANCE STEEL AL is expected to generate 0.55 times more return on investment than NEW MILLENNIUM. However, RELIANCE STEEL AL is 1.8 times less risky than NEW MILLENNIUM. It trades about 0.0 of its potential returns per unit of risk. NEW MILLENNIUM IRON is currently generating about -0.09 per unit of risk. If you would invest  25,682  in RELIANCE STEEL AL on December 21, 2024 and sell it today you would lose (62.00) from holding RELIANCE STEEL AL or give up 0.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

RELIANCE STEEL AL  vs.  NEW MILLENNIUM IRON

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 comparatively stable basic indicators, RELIANCE STEEL is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

NEW MILLENNIUM IRON

Risk-Adjusted Performance

Very Weak

Over the last 90 days NEW MILLENNIUM IRON 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 NEW MILLENNIUM

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

The idea behind RELIANCE STEEL AL and NEW MILLENNIUM IRON 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.