Correlation Between Reliance Steel and China Energy
Can any of the company-specific risk be diversified away by investing in both Reliance Steel and China Energy 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 China Energy 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 China Energy Engineering, you can compare the effects of market volatilities on Reliance Steel and China Energy 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 China Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and China Energy.
Diversification Opportunities for Reliance Steel and China Energy
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Reliance and China is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and China Energy Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Energy Engineering 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 China Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Energy Engineering has no effect on the direction of Reliance Steel i.e., Reliance Steel and China Energy go up and down completely randomly.
Pair Corralation between Reliance Steel and China Energy
Assuming the 90 days horizon Reliance Steel is expected to generate 5.07 times less return on investment than China Energy. But when comparing it to its historical volatility, Reliance Steel Aluminum is 2.51 times less risky than China Energy. It trades about 0.05 of its potential returns per unit of risk. China Energy Engineering is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 5.14 in China Energy Engineering on September 12, 2024 and sell it today you would earn a total of 6.86 from holding China Energy Engineering or generate 133.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reliance Steel Aluminum vs. China Energy Engineering
Performance |
| Timeline |
| Reliance Steel Aluminum |
| China Energy Engineering |
Reliance Steel and China Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Steel and China Energy
The main advantage of trading using opposite Reliance Steel and China Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, China Energy 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 China Energy will offset losses from the drop in China Energy's long position.| Reliance Steel vs. Tower One Wireless | Reliance Steel vs. T MOBILE US | Reliance Steel vs. Entravision Communications | Reliance Steel vs. Luckin Coffee |
| China Energy vs. Superior Plus Corp | China Energy vs. SIVERS SEMICONDUCTORS AB | China Energy vs. Norsk Hydro ASA | China Energy 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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