Correlation Between CHINA OIL and RELIANCE STEEL
Can any of the company-specific risk be diversified away by investing in both CHINA OIL 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 OIL 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 OIL AND and RELIANCE STEEL AL, you can compare the effects of market volatilities on CHINA OIL 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 OIL with a short position of RELIANCE STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA OIL and RELIANCE STEEL.
Diversification Opportunities for CHINA OIL and RELIANCE STEEL
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CHINA and RELIANCE is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding CHINA OIL AND 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 CHINA OIL 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 OIL AND 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 CHINA OIL i.e., CHINA OIL and RELIANCE STEEL go up and down completely randomly.
Pair Corralation between CHINA OIL and RELIANCE STEEL
Assuming the 90 days trading horizon CHINA OIL is expected to generate 2.91 times less return on investment than RELIANCE STEEL. But when comparing it to its historical volatility, CHINA OIL AND is 4.23 times less risky than RELIANCE STEEL. It trades about 0.09 of its potential returns per unit of risk. RELIANCE STEEL AL is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 27,153 in RELIANCE STEEL AL on September 2, 2024 and sell it today you would earn a total of 3,287 from holding RELIANCE STEEL AL or generate 12.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA OIL AND vs. RELIANCE STEEL AL
Performance |
| Timeline |
| CHINA OIL AND |
| RELIANCE STEEL AL |
CHINA OIL and RELIANCE STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA OIL and RELIANCE STEEL
The main advantage of trading using opposite CHINA OIL and RELIANCE STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA OIL 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.The idea behind CHINA OIL AND and RELIANCE STEEL AL 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.| RELIANCE STEEL vs. SIVERS SEMICONDUCTORS AB | RELIANCE STEEL vs. Darden Restaurants | RELIANCE STEEL vs. Reliance Steel Aluminum | RELIANCE STEEL vs. Q2M Managementberatung AG |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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