Correlation Between RELIANCE STEEL and EIDESVIK OFFSHORE

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

Diversification Opportunities for RELIANCE STEEL and EIDESVIK OFFSHORE

-0.42

Correlation Coefficient

RELIANCE STEEL  EIDESVIK OFFSHORE

Very good diversification

The 3 months correlation between RELIANCE and EIDESVIK is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding RELIANCE STEEL AL and EIDESVIK OFFSHORE NK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EIDESVIK OFFSHORE 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 EIDESVIK OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EIDESVIK OFFSHORE has no effect on the direction of RELIANCE STEEL i.e., RELIANCE STEEL and EIDESVIK OFFSHORE go up and down completely randomly.

Pair Corralation between RELIANCE STEEL and EIDESVIK OFFSHORE

Assuming the 90 days trading horizon RELIANCE STEEL AL is expected to generate 0.57 times more return on investment than EIDESVIK OFFSHORE. However, RELIANCE STEEL AL is 1.76 times less risky than EIDESVIK OFFSHORE. It trades about 0.01 of its potential returns per unit of risk. EIDESVIK OFFSHORE NK is currently generating about -0.03 per unit of risk. If you would invest  25,995  in RELIANCE STEEL AL on October 10, 2024 and sell it today you would earn a total of  15.00  from holding RELIANCE STEEL AL or generate 0.06% return on investment over 90 days.

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

RELIANCE STEEL AL  vs.  EIDESVIK OFFSHORE NK

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.

EIDESVIK OFFSHORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EIDESVIK OFFSHORE NK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, EIDESVIK OFFSHORE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with RELIANCE STEEL and EIDESVIK OFFSHORE

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

The idea behind RELIANCE STEEL AL and EIDESVIK OFFSHORE NK 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.