Correlation Between Reliance Industries and American Tower

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

By analyzing existing cross correlation between Reliance Industries Ltd and American Tower REIT, you can compare the effects of market volatilities on Reliance Industries and American Tower 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 Industries with a short position of American Tower. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Industries and American Tower.

Diversification Opportunities for Reliance Industries and American Tower

0.92

Correlation Coefficient

Reliance Industries  American Tower

Almost no diversification

The 3 months correlation between Reliance and American is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Ltd and American Tower REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Tower REIT and Reliance Industries 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 Industries Ltd are associated (or correlated) with American Tower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Tower REIT has no effect on the direction of Reliance Industries i.e., Reliance Industries and American Tower go up and down completely randomly.

Pair Corralation between Reliance Industries and American Tower

Assuming the 90 days trading horizon Reliance Industries Ltd is expected to under-perform the American Tower. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Industries Ltd is 1.07 times less risky than American Tower. The stock trades about -0.02 of its potential returns per unit of risk. The American Tower REIT is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  19,091  in American Tower REIT on October 22, 2024 and sell it today you would lose (54.00) from holding American Tower REIT or give up 0.28% of portfolio value over 90 days.

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

Reliance Industries Ltd  vs.  American Tower REIT

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Reliance Industries is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

American Tower REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Tower REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Reliance Industries and American Tower

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

The idea behind Reliance Industries Ltd and American Tower REIT 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.