Correlation Between Costamare and Reliance Steel

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

Diversification Opportunities for Costamare and Reliance Steel

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Costamare and Reliance is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Costamare 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 Costamare 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 Costamare 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 Costamare i.e., Costamare and Reliance Steel go up and down completely randomly.

Pair Corralation between Costamare and Reliance Steel

Given the investment horizon of 90 days Costamare is expected to under-perform the Reliance Steel. In addition to that, Costamare is 2.07 times more volatile than Reliance Steel Aluminum. It trades about -0.05 of its total potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.21 per unit of volatility. If you would invest  32,180  in Reliance Steel Aluminum on December 29, 2023 and sell it today you would earn a total of  1,238  from holding Reliance Steel Aluminum or generate 3.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

Costamare  vs.  Reliance Steel Aluminum

 Performance 
       Timeline  
Costamare 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Costamare are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Costamare may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Reliance Steel Aluminum 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Reliance Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Costamare and Reliance Steel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Costamare and Reliance Steel

The main advantage of trading using opposite Costamare and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costamare 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 Costamare 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.
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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