Correlation Between Reliance Steel and POSCO Holdings
Can any of the company-specific risk be diversified away by investing in both Reliance Steel and POSCO Holdings 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 POSCO Holdings 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 POSCO Holdings, you can compare the effects of market volatilities on Reliance Steel and POSCO Holdings 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 POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and POSCO Holdings.
Diversification Opportunities for Reliance Steel and POSCO Holdings
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Reliance and POSCO is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings 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 POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of Reliance Steel i.e., Reliance Steel and POSCO Holdings go up and down completely randomly.
Pair Corralation between Reliance Steel and POSCO Holdings
Assuming the 90 days horizon Reliance Steel Aluminum is expected to generate 1.04 times more return on investment than POSCO Holdings. However, Reliance Steel is 1.04 times more volatile than POSCO Holdings. It trades about 0.15 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.15 per unit of risk. If you would invest 26,520 in Reliance Steel Aluminum on August 24, 2024 and sell it today you would earn a total of 2,590 from holding Reliance Steel Aluminum or generate 9.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Reliance Steel Aluminum vs. POSCO Holdings
Performance |
| Timeline |
| Reliance Steel Aluminum |
| POSCO Holdings |
Reliance Steel and POSCO Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Steel and POSCO Holdings
The main advantage of trading using opposite Reliance Steel and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, POSCO Holdings 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 POSCO Holdings will offset losses from the drop in POSCO Holdings' long position.| Reliance Steel vs. Daito Trust Construction | Reliance Steel vs. Magnachip Semiconductor | Reliance Steel vs. Tower Semiconductor | Reliance Steel vs. Titan Machinery |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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