Correlation Between SCOTT TECHNOLOGY and Reliance Steel
Can any of the company-specific risk be diversified away by investing in both SCOTT TECHNOLOGY and Reliance Steel 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 SCOTT TECHNOLOGY and Reliance Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SCOTT TECHNOLOGY and Reliance Steel Aluminum, you can compare the effects of market volatilities on SCOTT TECHNOLOGY and Reliance Steel 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 SCOTT TECHNOLOGY with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCOTT TECHNOLOGY and Reliance Steel.
Diversification Opportunities for SCOTT TECHNOLOGY and Reliance Steel
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SCOTT and Reliance is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding SCOTT TECHNOLOGY and Reliance Steel Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Steel Aluminum and SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY are associated (or correlated) with Reliance Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Steel Aluminum has no effect on the direction of SCOTT TECHNOLOGY i.e., SCOTT TECHNOLOGY and Reliance Steel go up and down completely randomly.
Pair Corralation between SCOTT TECHNOLOGY and Reliance Steel
Assuming the 90 days trading horizon SCOTT TECHNOLOGY is expected to generate 1.1 times less return on investment than Reliance Steel. In addition to that, SCOTT TECHNOLOGY is 1.7 times more volatile than Reliance Steel Aluminum. It trades about 0.03 of its total potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.06 per unit of volatility. If you would invest 26,962 in Reliance Steel Aluminum on September 2, 2024 and sell it today you would earn a total of 3,488 from holding Reliance Steel Aluminum or generate 12.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SCOTT TECHNOLOGY vs. Reliance Steel Aluminum
Performance |
| Timeline |
| SCOTT TECHNOLOGY |
| Reliance Steel Aluminum |
SCOTT TECHNOLOGY and Reliance Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SCOTT TECHNOLOGY and Reliance Steel
The main advantage of trading using opposite SCOTT TECHNOLOGY and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCOTT TECHNOLOGY position performs unexpectedly, Reliance Steel 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 Reliance Steel will offset losses from the drop in Reliance Steel's long position.| SCOTT TECHNOLOGY vs. SIVERS SEMICONDUCTORS AB | SCOTT TECHNOLOGY vs. Darden Restaurants | SCOTT TECHNOLOGY vs. Reliance Steel Aluminum | SCOTT TECHNOLOGY vs. Q2M Managementberatung AG |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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