Correlation Between RELIANCE STEEL and Altair Engineering

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

Diversification Opportunities for RELIANCE STEEL and Altair Engineering

0.03

Correlation Coefficient

RELIANCE STEEL  Altair Engineering

Significant diversification

The 3 months correlation between RELIANCE and Altair is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding RELIANCE STEEL AL and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering 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 Altair Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altair Engineering has no effect on the direction of RELIANCE STEEL i.e., RELIANCE STEEL and Altair Engineering go up and down completely randomly.

Pair Corralation between RELIANCE STEEL and Altair Engineering

Assuming the 90 days trading horizon RELIANCE STEEL AL is expected to under-perform the Altair Engineering. In addition to that, RELIANCE STEEL is 1.01 times more volatile than Altair Engineering. It trades about 0.0 of its total potential returns per unit of risk. Altair Engineering is currently generating about 0.21 per unit of volatility. If you would invest  8,650  in Altair Engineering on October 11, 2024 and sell it today you would earn a total of  1,850  from holding Altair Engineering or generate 21.39% return on investment over 90 days.

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

RELIANCE STEEL AL  vs.  Altair Engineering

RELIANCE STEEL AL

Risk-Adjusted Performance

0 of 100

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

Altair Engineering

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Altair Engineering are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Altair Engineering reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RELIANCE STEEL and Altair Engineering

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

The idea behind RELIANCE STEEL AL and Altair Engineering 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.