Correlation Between Reliance Steel and Barrick Gold
Can any of the company-specific risk be diversified away by investing in both Reliance Steel and Barrick Gold 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 Barrick Gold 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 Barrick Gold Corp, you can compare the effects of market volatilities on Reliance Steel and Barrick Gold 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 Barrick Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and Barrick Gold.
Diversification Opportunities for Reliance Steel and Barrick Gold
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Reliance and Barrick is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Barrick Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrick Gold Corp 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 Barrick Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrick Gold Corp has no effect on the direction of Reliance Steel i.e., Reliance Steel and Barrick Gold go up and down completely randomly.
Pair Corralation between Reliance Steel and Barrick Gold
Allowing for the 90-day total investment horizon Reliance Steel Aluminum is expected to generate 1.23 times more return on investment than Barrick Gold. However, Reliance Steel is 1.23 times more volatile than Barrick Gold Corp. It trades about 0.12 of its potential returns per unit of risk. Barrick Gold Corp is currently generating about -0.14 per unit of risk. If you would invest 28,646 in Reliance Steel Aluminum on August 26, 2024 and sell it today you would earn a total of 3,281 from holding Reliance Steel Aluminum or generate 11.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reliance Steel Aluminum vs. Barrick Gold Corp
Performance |
| Timeline |
| Reliance Steel Aluminum |
| Barrick Gold Corp |
Reliance Steel and Barrick Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Steel and Barrick Gold
The main advantage of trading using opposite Reliance Steel and Barrick Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, Barrick Gold 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 Barrick Gold will offset losses from the drop in Barrick Gold's long position.The idea behind Reliance Steel Aluminum and Barrick Gold Corp 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.| Barrick Gold vs. Agnico Eagle Mines | Barrick Gold vs. Pan American Silver | Barrick Gold vs. Wheaton Precious Metals | Barrick Gold vs. Kinross Gold |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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