Correlation Between Reliance Steel and SENECA FOODS-A
Can any of the company-specific risk be diversified away by investing in both Reliance Steel and SENECA FOODS-A 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 SENECA FOODS-A 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 SENECA FOODS A, you can compare the effects of market volatilities on Reliance Steel and SENECA FOODS-A 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 SENECA FOODS-A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and SENECA FOODS-A.
Diversification Opportunities for Reliance Steel and SENECA FOODS-A
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Reliance and SENECA is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and SENECA FOODS A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SENECA FOODS A 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 SENECA FOODS-A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SENECA FOODS A has no effect on the direction of Reliance Steel i.e., Reliance Steel and SENECA FOODS-A go up and down completely randomly.
Pair Corralation between Reliance Steel and SENECA FOODS-A
Assuming the 90 days horizon Reliance Steel is expected to generate 1.59 times less return on investment than SENECA FOODS-A. But when comparing it to its historical volatility, Reliance Steel Aluminum is 1.3 times less risky than SENECA FOODS-A. It trades about 0.06 of its potential returns per unit of risk. SENECA FOODS A is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,200 in SENECA FOODS A on September 3, 2024 and sell it today you would earn a total of 1,250 from holding SENECA FOODS A or generate 24.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reliance Steel Aluminum vs. SENECA FOODS A
Performance |
| Timeline |
| Reliance Steel Aluminum |
| SENECA FOODS A |
Reliance Steel and SENECA FOODS-A Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Steel and SENECA FOODS-A
The main advantage of trading using opposite Reliance Steel and SENECA FOODS-A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, SENECA FOODS-A 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 SENECA FOODS-A will offset losses from the drop in SENECA FOODS-A's long position.| Reliance Steel vs. ArcelorMittal | Reliance Steel vs. Steel Dynamics | Reliance Steel vs. NIPPON STEEL SPADR | Reliance Steel vs. POSCO Holdings |
| SENECA FOODS-A vs. TOTAL GABON | SENECA FOODS-A vs. Walgreens Boots Alliance | SENECA FOODS-A 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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