Correlation Between Reliance Steel and AEGEAN AIRLINES

Can any of the company-specific risk be diversified away by investing in both Reliance Steel and AEGEAN AIRLINES 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 AEGEAN AIRLINES 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 AEGEAN AIRLINES, you can compare the effects of market volatilities on Reliance Steel and AEGEAN AIRLINES 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 AEGEAN AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and AEGEAN AIRLINES.

Diversification Opportunities for Reliance Steel and AEGEAN AIRLINES

-0.88

Correlation Coefficient

Reliance Steel  AEGEAN AIRLINES

Pay attention - limited upside

The 3 months correlation between Reliance and AEGEAN is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and AEGEAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEGEAN AIRLINES 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 AEGEAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEGEAN AIRLINES has no effect on the direction of Reliance Steel i.e., Reliance Steel and AEGEAN AIRLINES go up and down completely randomly.

Pair Corralation between Reliance Steel and AEGEAN AIRLINES

Assuming the 90 days horizon Reliance Steel Aluminum is expected to generate 1.65 times more return on investment than AEGEAN AIRLINES. However, Reliance Steel is 1.65 times more volatile than AEGEAN AIRLINES. It trades about 0.13 of its potential returns per unit of risk. AEGEAN AIRLINES is currently generating about -0.16 per unit of risk. If you would invest  25,744  in Reliance Steel Aluminum on September 3, 2024 and sell it today you would earn a total of  4,706  from holding Reliance Steel Aluminum or generate 18.28% return on investment over 90 days.

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

Reliance Steel Aluminum  vs.  AEGEAN AIRLINES

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 fragile basic indicators, Reliance Steel reported solid returns over the last few months and may actually be approaching a breakup point.

AEGEAN AIRLINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEGEAN AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Reliance Steel and AEGEAN AIRLINES

The main advantage of trading using opposite Reliance Steel and AEGEAN AIRLINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, AEGEAN AIRLINES 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 AEGEAN AIRLINES will offset losses from the drop in AEGEAN AIRLINES's long position.

The idea behind Reliance Steel Aluminum and AEGEAN AIRLINES 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.