Correlation Between Caseys General and RELIANCE STEEL
Can any of the company-specific risk be diversified away by investing in both Caseys General 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 Caseys General and RELIANCE STEEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caseys General Stores and RELIANCE STEEL AL, you can compare the effects of market volatilities on Caseys General 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 Caseys General with a short position of RELIANCE STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caseys General and RELIANCE STEEL.
Diversification Opportunities for Caseys General and RELIANCE STEEL
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caseys and RELIANCE is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores and RELIANCE STEEL AL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RELIANCE STEEL AL and Caseys General 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 Caseys General Stores 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 AL has no effect on the direction of Caseys General i.e., Caseys General and RELIANCE STEEL go up and down completely randomly.
Pair Corralation between Caseys General and RELIANCE STEEL
Assuming the 90 days trading horizon Caseys General Stores is expected to generate 0.88 times more return on investment than RELIANCE STEEL. However, Caseys General Stores is 1.14 times less risky than RELIANCE STEEL. It trades about -0.03 of its potential returns per unit of risk. RELIANCE STEEL AL is currently generating about -0.43 per unit of risk. If you would invest 39,200 in Caseys General Stores on September 21, 2024 and sell it today you would lose (400.00) from holding Caseys General Stores or give up 1.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caseys General Stores vs. RELIANCE STEEL AL
Performance |
| Timeline |
| Caseys General Stores |
| RELIANCE STEEL AL |
Caseys General and RELIANCE STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caseys General and RELIANCE STEEL
The main advantage of trading using opposite Caseys General and RELIANCE STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caseys General 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.| Caseys General vs. Apple Inc | Caseys General vs. Apple Inc | Caseys General vs. Apple Inc | Caseys General vs. Apple Inc |
| RELIANCE STEEL vs. Caseys General Stores | RELIANCE STEEL vs. Burlington Stores | RELIANCE STEEL vs. Ross Stores | RELIANCE STEEL vs. BURLINGTON STORES |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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