Correlation Between Reliance Steel and Regions Financial

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

Diversification Opportunities for Reliance Steel and Regions Financial

0.97

Correlation Coefficient

Reliance Steel  Regions Financial

Almost no diversification

The 3 months correlation between Reliance and Regions is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Regions Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regions Financial 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 Regions Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regions Financial has no effect on the direction of Reliance Steel i.e., Reliance Steel and Regions Financial go up and down completely randomly.

Pair Corralation between Reliance Steel and Regions Financial

Assuming the 90 days horizon Reliance Steel is expected to generate 1.27 times less return on investment than Regions Financial. In addition to that, Reliance Steel is 1.1 times more volatile than Regions Financial. It trades about 0.14 of its total potential returns per unit of risk. Regions Financial is currently generating about 0.19 per unit of volatility. If you would invest  2,075  in Regions Financial on August 31, 2024 and sell it today you would earn a total of  525.00  from holding Regions Financial or generate 25.3% return on investment over 90 days.

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

Reliance Steel Aluminum  vs.  Regions Financial

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.

Regions Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Regions Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Steel and Regions Financial

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

The idea behind Reliance Steel Aluminum and Regions Financial 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.