Correlation Between Reliance Steel and ZTO Express
Can any of the company-specific risk be diversified away by investing in both Reliance Steel and ZTO Express 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 ZTO Express 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 ZTO Express, you can compare the effects of market volatilities on Reliance Steel and ZTO Express 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 ZTO Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and ZTO Express.
Diversification Opportunities for Reliance Steel and ZTO Express
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Reliance and ZTO is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and ZTO Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTO Express 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 ZTO Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZTO Express has no effect on the direction of Reliance Steel i.e., Reliance Steel and ZTO Express go up and down completely randomly.
Pair Corralation between Reliance Steel and ZTO Express
Assuming the 90 days horizon Reliance Steel Aluminum is expected to generate 1.26 times more return on investment than ZTO Express. However, Reliance Steel is 1.26 times more volatile than ZTO Express. It trades about 0.25 of its potential returns per unit of risk. ZTO Express is currently generating about -0.32 per unit of risk. If you would invest 26,491 in Reliance Steel Aluminum on September 1, 2024 and sell it today you would earn a total of 3,989 from holding Reliance Steel Aluminum or generate 15.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Reliance Steel Aluminum vs. ZTO Express
Performance |
| Timeline |
| Reliance Steel Aluminum |
| ZTO Express |
Reliance Steel and ZTO Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Steel and ZTO Express
The main advantage of trading using opposite Reliance Steel and ZTO Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, ZTO Express 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 ZTO Express will offset losses from the drop in ZTO Express' long position.The idea behind Reliance Steel Aluminum and ZTO Express 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.| ZTO Express vs. Pure Storage | ZTO Express vs. Plastic Omnium | ZTO Express vs. Datang International Power | ZTO Express vs. Compagnie Plastic Omnium |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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