Correlation Between RELIANCE STEEL and BRF SA

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

Diversification Opportunities for RELIANCE STEEL and BRF SA

0.23

Correlation Coefficient

RELIANCE STEEL  BRF SA

Modest diversification

The 3 months correlation between RELIANCE and BRF is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding RELIANCE STEEL AL and BRF SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRF SA 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 BRF SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRF SA has no effect on the direction of RELIANCE STEEL i.e., RELIANCE STEEL and BRF SA go up and down completely randomly.

Pair Corralation between RELIANCE STEEL and BRF SA

Assuming the 90 days trading horizon RELIANCE STEEL AL is expected to generate 0.51 times more return on investment than BRF SA. However, RELIANCE STEEL AL is 1.94 times less risky than BRF SA. It trades about -0.42 of its potential returns per unit of risk. BRF SA is currently generating about -0.31 per unit of risk. If you would invest  28,840  in RELIANCE STEEL AL on October 9, 2024 and sell it today you would lose (2,940) from holding RELIANCE STEEL AL or give up 10.19% of portfolio value over 90 days.

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

RELIANCE STEEL AL  vs.  BRF SA

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

BRF SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BRF SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, BRF SA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with RELIANCE STEEL and BRF SA

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

The idea behind RELIANCE STEEL AL and BRF SA 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.