Correlation Between RELIANCE STEEL and Xenia Hotels

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

By analyzing existing cross correlation between RELIANCE STEEL AL and Xenia Hotels Resorts, you can compare the effects of market volatilities on RELIANCE STEEL and Xenia Hotels 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 Xenia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of RELIANCE STEEL and Xenia Hotels.

Diversification Opportunities for RELIANCE STEEL and Xenia Hotels

0.54

Correlation Coefficient

RELIANCE STEEL  Xenia Hotels

Very weak diversification

The 3 months correlation between RELIANCE and Xenia is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding RELIANCE STEEL AL and Xenia Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xenia Hotels Resorts 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 AL are associated (or correlated) with Xenia Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xenia Hotels Resorts has no effect on the direction of RELIANCE STEEL i.e., RELIANCE STEEL and Xenia Hotels go up and down completely randomly.

Pair Corralation between RELIANCE STEEL and Xenia Hotels

Assuming the 90 days trading horizon RELIANCE STEEL AL is expected to under-perform the Xenia Hotels. But the stock apears to be less risky and, when comparing its historical volatility, RELIANCE STEEL AL is 1.5 times less risky than Xenia Hotels. The stock trades about -0.56 of its potential returns per unit of risk. The Xenia Hotels Resorts is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,490  in Xenia Hotels Resorts on September 25, 2024 and sell it today you would lose (10.00) from holding Xenia Hotels Resorts or give up 0.67% of portfolio value over 90 days.

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

RELIANCE STEEL AL  vs.  Xenia Hotels Resorts

RELIANCE STEEL AL

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RELIANCE STEEL AL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, RELIANCE STEEL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Xenia Hotels Resorts

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xenia Hotels Resorts are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Xenia Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with RELIANCE STEEL and Xenia Hotels

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

The idea behind RELIANCE STEEL AL and Xenia Hotels Resorts 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.