Correlation Between Marubeni and Reliance Steel

Can any of the company-specific risk be diversified away by investing in both Marubeni 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 Marubeni and Reliance Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Marubeni and Reliance Steel Aluminum, you can compare the effects of market volatilities on Marubeni 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 Marubeni with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marubeni and Reliance Steel.

Diversification Opportunities for Marubeni and Reliance Steel

-0.14

Correlation Coefficient

Marubeni  Reliance Steel

Good diversification

The 3 months correlation between Marubeni and Reliance is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Marubeni 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 Marubeni 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 Marubeni 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 Marubeni i.e., Marubeni and Reliance Steel go up and down completely randomly.

Pair Corralation between Marubeni and Reliance Steel

Assuming the 90 days trading horizon Marubeni is expected to generate 7.18 times less return on investment than Reliance Steel. But when comparing it to its historical volatility, Marubeni is 1.13 times less risky than Reliance Steel. It trades about 0.02 of its potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  24,598  in Reliance Steel Aluminum on September 12, 2024 and sell it today you would earn a total of  4,202  from holding Reliance Steel Aluminum or generate 17.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Marubeni  vs.  Reliance Steel Aluminum

Marubeni

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marubeni are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Marubeni is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Reliance Steel Aluminum

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Reliance Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marubeni and Reliance Steel

The main advantage of trading using opposite Marubeni and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marubeni 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.

The idea behind Marubeni and Reliance Steel Aluminum 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.