Correlation Between RELIANCE STEEL and Federal Agricultural
Can any of the company-specific risk be diversified away by investing in both RELIANCE STEEL and Federal Agricultural 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 Federal Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RELIANCE STEEL AL and Federal Agricultural Mortgage, you can compare the effects of market volatilities on RELIANCE STEEL and Federal Agricultural 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 Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of RELIANCE STEEL and Federal Agricultural.
Diversification Opportunities for RELIANCE STEEL and Federal Agricultural
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between RELIANCE and Federal is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding RELIANCE STEEL AL and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural 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 AL are associated (or correlated) with Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of RELIANCE STEEL i.e., RELIANCE STEEL and Federal Agricultural go up and down completely randomly.
Pair Corralation between RELIANCE STEEL and Federal Agricultural
Assuming the 90 days trading horizon RELIANCE STEEL AL is expected to under-perform the Federal Agricultural. But the stock apears to be less risky and, when comparing its historical volatility, RELIANCE STEEL AL is 1.35 times less risky than Federal Agricultural. The stock trades about -0.62 of its potential returns per unit of risk. The Federal Agricultural Mortgage is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 19,266 in Federal Agricultural Mortgage on September 23, 2024 and sell it today you would lose (166.00) from holding Federal Agricultural Mortgage or give up 0.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
RELIANCE STEEL AL vs. Federal Agricultural Mortgage
Performance |
| Timeline |
| RELIANCE STEEL AL |
| Federal Agricultural |
RELIANCE STEEL and Federal Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RELIANCE STEEL and Federal Agricultural
The main advantage of trading using opposite RELIANCE STEEL and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RELIANCE STEEL position performs unexpectedly, Federal Agricultural 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 Federal Agricultural will offset losses from the drop in Federal Agricultural's long position.| RELIANCE STEEL vs. Apple Inc | RELIANCE STEEL vs. Apple Inc | RELIANCE STEEL vs. Apple Inc | RELIANCE STEEL vs. Apple Inc |
| Federal Agricultural vs. Evolution Mining Limited | Federal Agricultural vs. GRIFFIN MINING LTD | Federal Agricultural vs. RELIANCE STEEL AL | Federal Agricultural vs. PKSHA TECHNOLOGY INC |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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