Correlation Between Wabash National and RELIANCE

Can any of the company-specific risk be diversified away by investing in both Wabash National and RELIANCE 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 Wabash National and RELIANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wabash National and RELIANCE STL ALUM, you can compare the effects of market volatilities on Wabash National and RELIANCE 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 Wabash National with a short position of RELIANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wabash National and RELIANCE.

Diversification Opportunities for Wabash National and RELIANCE

-0.2

Correlation Coefficient

Wabash National  RELIANCE

Good diversification

The 3 months correlation between Wabash and RELIANCE is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and RELIANCE STL ALUM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RELIANCE STL ALUM and Wabash National 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 Wabash National are associated (or correlated) with RELIANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RELIANCE STL ALUM has no effect on the direction of Wabash National i.e., Wabash National and RELIANCE go up and down completely randomly.

Pair Corralation between Wabash National and RELIANCE

Considering the 90-day investment horizon Wabash National is expected to under-perform the RELIANCE. In addition to that, Wabash National is 1.62 times more volatile than RELIANCE STL ALUM. It trades about -0.19 of its total potential returns per unit of risk. RELIANCE STL ALUM is currently generating about 0.02 per unit of volatility. If you would invest  10,818  in RELIANCE STL ALUM on December 23, 2024 and sell it today you would earn a total of  20.00  from holding RELIANCE STL ALUM or generate 0.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	24.59%
Values	Daily Returns

Wabash National  vs.  RELIANCE STL ALUM

Wabash National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wabash National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

RELIANCE STL ALUM

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RELIANCE STL ALUM are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, RELIANCE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wabash National and RELIANCE

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

The idea behind Wabash National and RELIANCE STL ALUM 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.