Correlation Between China Communications and Reliance Steel
Can any of the company-specific risk be diversified away by investing in both China Communications 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 China Communications and Reliance Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Communications Services and Reliance Steel Aluminum, you can compare the effects of market volatilities on China Communications 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 China Communications with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and Reliance Steel.
Diversification Opportunities for China Communications and Reliance Steel
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and Reliance is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services 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 China Communications 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 China Communications Services 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 China Communications i.e., China Communications and Reliance Steel go up and down completely randomly.
Pair Corralation between China Communications and Reliance Steel
Assuming the 90 days horizon China Communications Services is expected to under-perform the Reliance Steel. But the stock apears to be less risky and, when comparing its historical volatility, China Communications Services is 1.63 times less risky than Reliance Steel. The stock trades about -0.02 of its potential returns per unit of risk. The Reliance Steel Aluminum is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 27,179 in Reliance Steel Aluminum on September 19, 2024 and sell it today you would earn a total of 541.00 from holding Reliance Steel Aluminum or generate 1.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Communications Services vs. Reliance Steel Aluminum
Performance |
| Timeline |
| China Communications |
| Reliance Steel Aluminum |
China Communications and Reliance Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Communications and Reliance Steel
The main advantage of trading using opposite China Communications and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Communications 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.| China Communications vs. Superior Plus Corp | China Communications vs. SIVERS SEMICONDUCTORS AB | China Communications vs. Norsk Hydro ASA | China Communications vs. Reliance Steel Aluminum |
| Reliance Steel vs. PT Indofood Sukses | Reliance Steel vs. Highlight Communications AG | Reliance Steel vs. China Communications Services | Reliance Steel vs. Consolidated Communications Holdings |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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