Correlation Between Reliance Steel and Century Aluminum
Can any of the company-specific risk be diversified away by investing in both Reliance Steel and Century Aluminum 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 Reliance Steel and Century Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reliance Steel Aluminum and Century Aluminum, you can compare the effects of market volatilities on Reliance Steel and Century Aluminum 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 Reliance Steel with a short position of Century Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and Century Aluminum.
Diversification Opportunities for Reliance Steel and Century Aluminum
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Reliance and Century is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum and Reliance Steel 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 Reliance Steel Aluminum are associated (or correlated) with Century Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Aluminum has no effect on the direction of Reliance Steel i.e., Reliance Steel and Century Aluminum go up and down completely randomly.
Pair Corralation between Reliance Steel and Century Aluminum
Allowing for the 90-day total investment horizon Reliance Steel is expected to generate 10.9 times less return on investment than Century Aluminum. But when comparing it to its historical volatility, Reliance Steel Aluminum is 2.2 times less risky than Century Aluminum. It trades about 0.02 of its potential returns per unit of risk. Century Aluminum is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,209 in Century Aluminum on November 3, 2024 and sell it today you would earn a total of 619.00 from holding Century Aluminum or generate 51.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Reliance Steel Aluminum vs. Century Aluminum
Performance |
| Timeline |
| Reliance Steel Aluminum |
| Century Aluminum |
Reliance Steel and Century Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Steel and Century Aluminum
The main advantage of trading using opposite Reliance Steel and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, Century Aluminum 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 Century Aluminum will offset losses from the drop in Century Aluminum's long position.| Reliance Steel vs. Outokumpu Oyj ADR | Reliance Steel vs. Olympic Steel | Reliance Steel vs. POSCO Holdings | Reliance Steel vs. Nucor Corp |
| Century Aluminum vs. Kaiser Aluminum | Century Aluminum vs. Commercial Metals | Century Aluminum vs. Steel Dynamics | Century Aluminum vs. Reliance Steel Aluminum |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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