Correlation Between RELIANCE STEEL and Sumitomo Mitsui

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

Diversification Opportunities for RELIANCE STEEL and Sumitomo Mitsui

-0.35

Correlation Coefficient

RELIANCE STEEL  Sumitomo Mitsui

Very good diversification

The 3 months correlation between RELIANCE and Sumitomo is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding RELIANCE STEEL AL and Sumitomo Mitsui Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Cons 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 Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Cons has no effect on the direction of RELIANCE STEEL i.e., RELIANCE STEEL and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between RELIANCE STEEL and Sumitomo Mitsui

Assuming the 90 days trading horizon RELIANCE STEEL is expected to generate 1.54 times less return on investment than Sumitomo Mitsui. But when comparing it to its historical volatility, RELIANCE STEEL AL is 1.0 times less risky than Sumitomo Mitsui. It trades about 0.02 of its potential returns per unit of risk. Sumitomo Mitsui Construction is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  246.00  in Sumitomo Mitsui Construction on September 29, 2024 and sell it today you would earn a total of  4.00  from holding Sumitomo Mitsui Construction or generate 1.63% return on investment over 90 days.

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

RELIANCE STEEL AL  vs.  Sumitomo Mitsui Construction

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

Sumitomo Mitsui Cons

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Construction are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sumitomo Mitsui is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with RELIANCE STEEL and Sumitomo Mitsui

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

The idea behind RELIANCE STEEL AL and Sumitomo Mitsui Construction 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 Anywhere module to track or share privately all of your investments from the convenience of any device.