Correlation Between Option Care and Reliance Steel
Can any of the company-specific risk be diversified away by investing in both Option Care 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 Option Care and Reliance Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Option Care Health and Reliance Steel Aluminum, you can compare the effects of market volatilities on Option Care 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 Option Care with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Option Care and Reliance Steel.
Diversification Opportunities for Option Care and Reliance Steel
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Option and Reliance is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Option Care Health 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 Option Care 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 Option Care Health 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 Option Care i.e., Option Care and Reliance Steel go up and down completely randomly.
Pair Corralation between Option Care and Reliance Steel
Assuming the 90 days trading horizon Option Care Health is expected to under-perform the Reliance Steel. In addition to that, Option Care is 1.22 times more volatile than Reliance Steel Aluminum. It trades about -0.03 of its total potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.05 per unit of volatility. If you would invest 24,805 in Reliance Steel Aluminum on August 27, 2024 and sell it today you would earn a total of 5,385 from holding Reliance Steel Aluminum or generate 21.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Option Care Health vs. Reliance Steel Aluminum
Performance |
| Timeline |
| Option Care Health |
| Reliance Steel Aluminum |
Option Care and Reliance Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Option Care and Reliance Steel
The main advantage of trading using opposite Option Care and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Option Care 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.| Option Care vs. HYGEIA HC HLDGS | Option Care vs. Superior Plus Corp | Option Care vs. Origin Agritech | Option Care vs. Identiv |
| Reliance Steel vs. G8 EDUCATION | Reliance Steel vs. Solstad Offshore ASA | Reliance Steel vs. SOLSTAD OFFSHORE NK | Reliance Steel vs. STRAYER EDUCATION |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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