Correlation Between RELIANCE STEEL and AGF Management

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

Diversification Opportunities for RELIANCE STEEL and AGF Management

0.7

Correlation Coefficient

RELIANCE STEEL  AGF Management

Poor diversification

The 3 months correlation between RELIANCE and AGF is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding RELIANCE STEEL AL and AGF Management Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGF Management 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 AGF Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGF Management has no effect on the direction of RELIANCE STEEL i.e., RELIANCE STEEL and AGF Management go up and down completely randomly.

Pair Corralation between RELIANCE STEEL and AGF Management

Assuming the 90 days trading horizon RELIANCE STEEL AL is expected to generate 0.59 times more return on investment than AGF Management. However, RELIANCE STEEL AL is 1.71 times less risky than AGF Management. It trades about 0.0 of its potential returns per unit of risk. AGF Management Limited is currently generating about -0.06 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 (102.00) from holding RELIANCE STEEL AL or give up 0.4% of portfolio value over 90 days.

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

RELIANCE STEEL AL  vs.  AGF Management Limited

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

AGF Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days AGF Management Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with RELIANCE STEEL and AGF Management

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

The idea behind RELIANCE STEEL AL and AGF Management Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.