Correlation Between Fortitude Gold and Reliance Steel

Can any of the company-specific risk be diversified away by investing in both Fortitude Gold 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 Fortitude Gold and Reliance Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fortitude Gold Corp and Reliance Steel Aluminum, you can compare the effects of market volatilities on Fortitude Gold 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 Fortitude Gold with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortitude Gold and Reliance Steel.

Diversification Opportunities for Fortitude Gold and Reliance Steel

0.23

Correlation Coefficient

Fortitude Gold  Reliance Steel

Modest diversification

The 3 months correlation between Fortitude and Reliance is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Fortitude Gold Corp 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 Fortitude Gold 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 Fortitude Gold Corp 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 Fortitude Gold i.e., Fortitude Gold and Reliance Steel go up and down completely randomly.

Pair Corralation between Fortitude Gold and Reliance Steel

Given the investment horizon of 90 days Fortitude Gold Corp is expected to generate 2.0 times more return on investment than Reliance Steel. However, Fortitude Gold is 2.0 times more volatile than Reliance Steel Aluminum. It trades about -0.07 of its potential returns per unit of risk. Reliance Steel Aluminum is currently generating about -0.37 per unit of risk. If you would invest  524.00  in Fortitude Gold Corp on February 6, 2024 and sell it today you would lose (32.00) from holding Fortitude Gold Corp or give up 6.11% of portfolio value over 90 days.

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

Fortitude Gold Corp  vs.  Reliance Steel Aluminum

Fortitude Gold Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fortitude Gold Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Fortitude Gold may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Reliance Steel Aluminum

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum 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.

Pair Trading with Fortitude Gold and Reliance Steel

The main advantage of trading using opposite Fortitude Gold and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortitude Gold 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 Fortitude Gold Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.