Correlation Between RELIANCE STEEL and SBI Insurance

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

Diversification Opportunities for RELIANCE STEEL and SBI Insurance

-0.18

Correlation Coefficient

RELIANCE STEEL  SBI Insurance

Good diversification

The 3 months correlation between RELIANCE and SBI is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding RELIANCE STEEL AL and SBI Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Insurance Group 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 SBI Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Insurance Group has no effect on the direction of RELIANCE STEEL i.e., RELIANCE STEEL and SBI Insurance go up and down completely randomly.

Pair Corralation between RELIANCE STEEL and SBI Insurance

Assuming the 90 days trading horizon RELIANCE STEEL AL is expected to under-perform the SBI Insurance. But the stock apears to be less risky and, when comparing its historical volatility, RELIANCE STEEL AL is 1.25 times less risky than SBI Insurance. The stock trades about -0.08 of its potential returns per unit of risk. The SBI Insurance Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  625.00  in SBI Insurance Group on December 2, 2024 and sell it today you would earn a total of  95.00  from holding SBI Insurance Group or generate 15.2% 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.  SBI Insurance Group

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 latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SBI Insurance Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Insurance Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SBI Insurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RELIANCE STEEL and SBI Insurance

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

The idea behind RELIANCE STEEL AL and SBI Insurance Group 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..