Correlation Between Reliance Steel and INTERSHOP Communications

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Can any of the company-specific risk be diversified away by investing in both Reliance Steel and INTERSHOP Communications 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 INTERSHOP Communications 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 INTERSHOP Communications Aktiengesellschaft, you can compare the effects of market volatilities on Reliance Steel and INTERSHOP Communications 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 INTERSHOP Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and INTERSHOP Communications.

Diversification Opportunities for Reliance Steel and INTERSHOP Communications

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Reliance and INTERSHOP is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and INTERSHOP Communications Aktie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERSHOP Communications 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 INTERSHOP Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERSHOP Communications has no effect on the direction of Reliance Steel i.e., Reliance Steel and INTERSHOP Communications go up and down completely randomly.

Pair Corralation between Reliance Steel and INTERSHOP Communications

Assuming the 90 days horizon Reliance Steel Aluminum is expected to generate 0.82 times more return on investment than INTERSHOP Communications. However, Reliance Steel Aluminum is 1.22 times less risky than INTERSHOP Communications. It trades about 0.06 of its potential returns per unit of risk. INTERSHOP Communications Aktiengesellschaft is currently generating about -0.05 per unit of risk. If you would invest  25,692  in Reliance Steel Aluminum on September 14, 2024 and sell it today you would earn a total of  3,358  from holding Reliance Steel Aluminum or generate 13.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Reliance Steel Aluminum  vs.  INTERSHOP Communications Aktie

 Performance 
       Timeline  
Reliance Steel Aluminum 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Reliance Steel reported solid returns over the last few months and may actually be approaching a breakup point.
INTERSHOP Communications 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in INTERSHOP Communications Aktiengesellschaft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, INTERSHOP Communications is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Reliance Steel and INTERSHOP Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Reliance Steel and INTERSHOP Communications

The main advantage of trading using opposite Reliance Steel and INTERSHOP Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, INTERSHOP Communications 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 INTERSHOP Communications will offset losses from the drop in INTERSHOP Communications' long position.
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The idea behind Reliance Steel Aluminum and INTERSHOP Communications Aktiengesellschaft pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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