Correlation Between Reliance Steel and HANOVER INSURANCE
Can any of the company-specific risk be diversified away by investing in both Reliance Steel and HANOVER INSURANCE 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 HANOVER INSURANCE 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 HANOVER INSURANCE, you can compare the effects of market volatilities on Reliance Steel and HANOVER INSURANCE 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 HANOVER INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and HANOVER INSURANCE.
Diversification Opportunities for Reliance Steel and HANOVER INSURANCE
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Reliance and HANOVER is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE 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 HANOVER INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HANOVER INSURANCE has no effect on the direction of Reliance Steel i.e., Reliance Steel and HANOVER INSURANCE go up and down completely randomly.
Pair Corralation between Reliance Steel and HANOVER INSURANCE
Assuming the 90 days horizon Reliance Steel Aluminum is expected to generate 1.22 times more return on investment than HANOVER INSURANCE. However, Reliance Steel is 1.22 times more volatile than HANOVER INSURANCE. It trades about 0.06 of its potential returns per unit of risk. HANOVER INSURANCE is currently generating about 0.04 per unit of risk. If you would invest 18,785 in Reliance Steel Aluminum on September 3, 2024 and sell it today you would earn a total of 11,665 from holding Reliance Steel Aluminum or generate 62.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reliance Steel Aluminum vs. HANOVER INSURANCE
Performance |
| Timeline |
| Reliance Steel Aluminum |
| HANOVER INSURANCE |
Reliance Steel and HANOVER INSURANCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Steel and HANOVER INSURANCE
The main advantage of trading using opposite Reliance Steel and HANOVER INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, HANOVER INSURANCE 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 HANOVER INSURANCE will offset losses from the drop in HANOVER INSURANCE's long position.| Reliance Steel vs. ArcelorMittal | Reliance Steel vs. Steel Dynamics | Reliance Steel vs. NIPPON STEEL SPADR | Reliance Steel vs. POSCO Holdings |
| HANOVER INSURANCE vs. TOTAL GABON | HANOVER INSURANCE vs. Walgreens Boots Alliance | HANOVER INSURANCE vs. Peak Resources Limited |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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