Correlation Between Reliance Steel and CapitaLand Investment
Can any of the company-specific risk be diversified away by investing in both Reliance Steel and CapitaLand Investment 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 CapitaLand Investment 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 CapitaLand Investment Limited, you can compare the effects of market volatilities on Reliance Steel and CapitaLand Investment 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 CapitaLand Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and CapitaLand Investment.
Diversification Opportunities for Reliance Steel and CapitaLand Investment
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Reliance and CapitaLand is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment 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 CapitaLand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapitaLand Investment has no effect on the direction of Reliance Steel i.e., Reliance Steel and CapitaLand Investment go up and down completely randomly.
Pair Corralation between Reliance Steel and CapitaLand Investment
Assuming the 90 days horizon Reliance Steel Aluminum is expected to generate 1.11 times more return on investment than CapitaLand Investment. However, Reliance Steel is 1.11 times more volatile than CapitaLand Investment Limited. It trades about 0.03 of its potential returns per unit of risk. CapitaLand Investment Limited is currently generating about -0.01 per unit of risk. If you would invest 24,805 in Reliance Steel Aluminum on September 12, 2024 and sell it today you would earn a total of 3,995 from holding Reliance Steel Aluminum or generate 16.11% 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. CapitaLand Investment Limited
Performance |
| Timeline |
| Reliance Steel Aluminum |
| CapitaLand Investment |
Reliance Steel and CapitaLand Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Steel and CapitaLand Investment
The main advantage of trading using opposite Reliance Steel and CapitaLand Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, CapitaLand Investment 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 CapitaLand Investment will offset losses from the drop in CapitaLand Investment'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 |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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