Correlation Between Reliance Steel and Graphic Packaging

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

Diversification Opportunities for Reliance Steel and Graphic Packaging

0.66

Correlation Coefficient

Reliance Steel  Graphic Packaging

Poor diversification

The 3 months correlation between Reliance and Graphic is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Graphic Packaging Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphic Packaging Holding 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 Graphic Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphic Packaging Holding has no effect on the direction of Reliance Steel i.e., Reliance Steel and Graphic Packaging go up and down completely randomly.

Pair Corralation between Reliance Steel and Graphic Packaging

Assuming the 90 days horizon Reliance Steel Aluminum is expected to generate 1.33 times more return on investment than Graphic Packaging. However, Reliance Steel is 1.33 times more volatile than Graphic Packaging Holding. It trades about 0.13 of its potential returns per unit of risk. Graphic Packaging Holding is currently generating about 0.03 per unit of risk. If you would invest  24,867  in Reliance Steel Aluminum on September 14, 2024 and sell it today you would earn a total of  4,243  from holding Reliance Steel Aluminum or generate 17.06% return on investment over 90 days.

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

Reliance Steel Aluminum  vs.  Graphic Packaging Holding

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.

Graphic Packaging Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Graphic Packaging Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Graphic Packaging is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Reliance Steel and Graphic Packaging

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

The idea behind Reliance Steel Aluminum and Graphic Packaging Holding 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.