Correlation Between Constellium and Reliance Steel

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Can any of the company-specific risk be diversified away by investing in both Constellium 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 Constellium and Reliance Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Constellium Nv and Reliance Steel Aluminum, you can compare the effects of market volatilities on Constellium 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 Constellium with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellium and Reliance Steel.

Diversification Opportunities for Constellium and Reliance Steel

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Constellium and Reliance is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Constellium Nv 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 Constellium 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 Constellium Nv 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 Constellium i.e., Constellium and Reliance Steel go up and down completely randomly.

Pair Corralation between Constellium and Reliance Steel

Given the investment horizon of 90 days Constellium is expected to generate 1.52 times less return on investment than Reliance Steel. In addition to that, Constellium is 1.51 times more volatile than Reliance Steel Aluminum. It trades about 0.03 of its total potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.08 per unit of volatility. If you would invest  17,722  in Reliance Steel Aluminum on December 30, 2023 and sell it today you would earn a total of  15,696  from holding Reliance Steel Aluminum or generate 88.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Constellium Nv  vs.  Reliance Steel Aluminum

 Performance 
       Timeline  
Constellium Nv 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Constellium Nv are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Constellium displayed solid returns over the last few months and may actually be approaching a breakup point.
Reliance Steel Aluminum 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Reliance Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Constellium and Reliance Steel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Constellium and Reliance Steel

The main advantage of trading using opposite Constellium and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellium 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 Constellium Nv 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.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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