Correlation Between Reliance Steel and Benchmark Electronics
Can any of the company-specific risk be diversified away by investing in both Reliance Steel and Benchmark Electronics 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 Benchmark Electronics 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 Benchmark Electronics, you can compare the effects of market volatilities on Reliance Steel and Benchmark Electronics 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 Benchmark Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and Benchmark Electronics.
Diversification Opportunities for Reliance Steel and Benchmark Electronics
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Reliance and Benchmark is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Benchmark Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Electronics 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 Benchmark Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Electronics has no effect on the direction of Reliance Steel i.e., Reliance Steel and Benchmark Electronics go up and down completely randomly.
Pair Corralation between Reliance Steel and Benchmark Electronics
Assuming the 90 days horizon Reliance Steel Aluminum is expected to generate 0.65 times more return on investment than Benchmark Electronics. However, Reliance Steel Aluminum is 1.53 times less risky than Benchmark Electronics. It trades about 0.33 of its potential returns per unit of risk. Benchmark Electronics is currently generating about 0.2 per unit of risk. If you would invest 25,750 in Reliance Steel Aluminum on October 20, 2024 and sell it today you would earn a total of 1,650 from holding Reliance Steel Aluminum or generate 6.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reliance Steel Aluminum vs. Benchmark Electronics
Performance |
| Timeline |
| Reliance Steel Aluminum |
| Benchmark Electronics |
Reliance Steel and Benchmark Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Steel and Benchmark Electronics
The main advantage of trading using opposite Reliance Steel and Benchmark Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, Benchmark Electronics 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 Benchmark Electronics will offset losses from the drop in Benchmark Electronics' long position.| Reliance Steel vs. CHIBA BANK | Reliance Steel vs. TOMBADOR IRON LTD | Reliance Steel vs. COSMOSTEEL HLDGS | Reliance Steel vs. SUN LIFE FINANCIAL |
| Benchmark Electronics vs. INTERCONT HOTELS | Benchmark Electronics vs. Air Lease | Benchmark Electronics vs. Sixt Leasing SE | Benchmark Electronics vs. PPHE HOTEL GROUP |
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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