Correlation Between RELIANCE STEEL and BE Semiconductor

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

Diversification Opportunities for RELIANCE STEEL and BE Semiconductor

-0.37

Correlation Coefficient

RELIANCE STEEL  BE Semiconductor

Very good diversification

The 3 months correlation between RELIANCE and BSI is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding RELIANCE STEEL AL and BE Semiconductor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BE Semiconductor Ind 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 BE Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BE Semiconductor Ind has no effect on the direction of RELIANCE STEEL i.e., RELIANCE STEEL and BE Semiconductor go up and down completely randomly.

Pair Corralation between RELIANCE STEEL and BE Semiconductor

Assuming the 90 days trading horizon RELIANCE STEEL AL is expected to under-perform the BE Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, RELIANCE STEEL AL is 1.66 times less risky than BE Semiconductor. The stock trades about -0.4 of its potential returns per unit of risk. The BE Semiconductor Industries is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest  12,355  in BE Semiconductor Industries on October 10, 2024 and sell it today you would earn a total of  2,780  from holding BE Semiconductor Industries or generate 22.5% 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.  BE Semiconductor Industries

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

BE Semiconductor Ind

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BE Semiconductor Industries are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BE Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RELIANCE STEEL and BE Semiconductor

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

The idea behind RELIANCE STEEL AL and BE Semiconductor Industries 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.