Correlation Between CITY OFFICE and Reliance Steel
Can any of the company-specific risk be diversified away by investing in both CITY OFFICE and Reliance Steel 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 CITY OFFICE and Reliance Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CITY OFFICE REIT and Reliance Steel Aluminum, you can compare the effects of market volatilities on CITY OFFICE and Reliance Steel 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 CITY OFFICE with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITY OFFICE and Reliance Steel.
Diversification Opportunities for CITY OFFICE and Reliance Steel
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between CITY and Reliance is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding CITY OFFICE REIT and Reliance Steel Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Steel Aluminum and CITY OFFICE 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 CITY OFFICE REIT are associated (or correlated) with Reliance Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Steel Aluminum has no effect on the direction of CITY OFFICE i.e., CITY OFFICE and Reliance Steel go up and down completely randomly.
Pair Corralation between CITY OFFICE and Reliance Steel
Assuming the 90 days horizon CITY OFFICE REIT is expected to generate 3.01 times more return on investment than Reliance Steel. However, CITY OFFICE is 3.01 times more volatile than Reliance Steel Aluminum. It trades about 0.2 of its potential returns per unit of risk. Reliance Steel Aluminum is currently generating about -0.13 per unit of risk. If you would invest 470.00 in CITY OFFICE REIT on September 12, 2024 and sell it today you would earn a total of 70.00 from holding CITY OFFICE REIT or generate 14.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CITY OFFICE REIT vs. Reliance Steel Aluminum
Performance |
| Timeline |
| CITY OFFICE REIT |
| Reliance Steel Aluminum |
CITY OFFICE and Reliance Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CITY OFFICE and Reliance Steel
The main advantage of trading using opposite CITY OFFICE and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITY OFFICE position performs unexpectedly, Reliance Steel 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 Steel will offset losses from the drop in Reliance Steel's long position.| CITY OFFICE vs. Office Properties Income | CITY OFFICE vs. CREMECOMTRSBI DL 001 | CITY OFFICE vs. Superior Plus Corp | CITY OFFICE vs. SIVERS SEMICONDUCTORS AB |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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