Correlation Between Reliance Steel and CGN Power
Can any of the company-specific risk be diversified away by investing in both Reliance Steel and CGN Power 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 CGN Power 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 CGN Power Co, you can compare the effects of market volatilities on Reliance Steel and CGN Power 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 CGN Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and CGN Power.
Diversification Opportunities for Reliance Steel and CGN Power
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Reliance and CGN is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and CGN Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGN Power 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 CGN Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGN Power has no effect on the direction of Reliance Steel i.e., Reliance Steel and CGN Power go up and down completely randomly.
Pair Corralation between Reliance Steel and CGN Power
Assuming the 90 days horizon Reliance Steel is expected to generate 10.67 times less return on investment than CGN Power. But when comparing it to its historical volatility, Reliance Steel Aluminum is 6.62 times less risky than CGN Power. It trades about 0.05 of its potential returns per unit of risk. CGN Power Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 7.14 in CGN Power Co on October 1, 2024 and sell it today you would earn a total of 20.86 from holding CGN Power Co or generate 292.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Reliance Steel Aluminum vs. CGN Power Co
Performance |
| Timeline |
| Reliance Steel Aluminum |
| CGN Power |
Reliance Steel and CGN Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Steel and CGN Power
The main advantage of trading using opposite Reliance Steel and CGN Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, CGN Power 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 CGN Power will offset losses from the drop in CGN Power's long position.| Reliance Steel vs. AOYAMA TRADING | Reliance Steel vs. MOLSON RS BEVERAGE | Reliance Steel vs. National Beverage Corp | Reliance Steel vs. JJ SNACK FOODS |
| CGN Power vs. Cal Maine Foods | CGN Power vs. TreeHouse Foods | CGN Power vs. National Beverage Corp | CGN Power vs. BORR DRILLING NEW |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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