Correlation Between Reliance Steel and FMC
Can any of the company-specific risk be diversified away by investing in both Reliance Steel and FMC 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 FMC 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 FMC Corporation, you can compare the effects of market volatilities on Reliance Steel and FMC 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 FMC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and FMC.
Diversification Opportunities for Reliance Steel and FMC
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Reliance and FMC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and FMC Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FMC Corporation 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 FMC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FMC Corporation has no effect on the direction of Reliance Steel i.e., Reliance Steel and FMC go up and down completely randomly.
Pair Corralation between Reliance Steel and FMC
Allowing for the 90-day total investment horizon Reliance Steel Aluminum is expected to generate 0.54 times more return on investment than FMC. However, Reliance Steel Aluminum is 1.85 times less risky than FMC. It trades about 0.02 of its potential returns per unit of risk. FMC Corporation is currently generating about -0.03 per unit of risk. If you would invest 27,460 in Reliance Steel Aluminum on November 9, 2024 and sell it today you would earn a total of 1,050 from holding Reliance Steel Aluminum or generate 3.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reliance Steel Aluminum vs. FMC Corp.
Performance |
| Timeline |
| Reliance Steel Aluminum |
| FMC Corporation |
Reliance Steel and FMC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Steel and FMC
The main advantage of trading using opposite Reliance Steel and FMC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, FMC 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 FMC will offset losses from the drop in FMC's long position.| Reliance Steel vs. Outokumpu Oyj ADR | Reliance Steel vs. Olympic Steel | Reliance Steel vs. POSCO Holdings | Reliance Steel vs. Nucor Corp |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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