Correlation Between Reliance Steel and Metro AG
Can any of the company-specific risk be diversified away by investing in both Reliance Steel and Metro AG 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 Metro AG 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 Metro AG, you can compare the effects of market volatilities on Reliance Steel and Metro AG 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 Metro AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and Metro AG.
Diversification Opportunities for Reliance Steel and Metro AG
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Reliance and Metro is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG 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 Metro AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro AG has no effect on the direction of Reliance Steel i.e., Reliance Steel and Metro AG go up and down completely randomly.
Pair Corralation between Reliance Steel and Metro AG
Assuming the 90 days horizon Reliance Steel Aluminum is expected to under-perform the Metro AG. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Steel Aluminum is 1.38 times less risky than Metro AG. The stock trades about -0.19 of its potential returns per unit of risk. The Metro AG is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 500.00 in Metro AG on September 19, 2024 and sell it today you would lose (4.00) from holding Metro AG or give up 0.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reliance Steel Aluminum vs. Metro AG
Performance |
| Timeline |
| Reliance Steel Aluminum |
| Metro AG |
Reliance Steel and Metro AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Steel and Metro AG
The main advantage of trading using opposite Reliance Steel and Metro AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, Metro AG 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 Metro AG will offset losses from the drop in Metro AG's long position.| Reliance Steel vs. PT Indofood Sukses | Reliance Steel vs. Highlight Communications AG | Reliance Steel vs. China Communications Services | Reliance Steel vs. Consolidated Communications Holdings |
| Metro AG vs. TYSON FOODS A | Metro AG vs. JJ SNACK FOODS | Metro AG vs. National Beverage Corp | Metro AG vs. Entravision Communications |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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